One reason is that the South Korean government protected its domestic market from foreign investment, enabling its champion companies to strengthen themselves with protected domestic markets. For example, until the late 1990s no foreign direct investment was allowed that was directed towards producing consumer goods within Korea. In fact, FDI accounted for a very small share of private capital inflows. South Korean officials also negotiated very strict transfer of technology agreements when they did allow FDI in selected areas. In addition, South Korea had area diversification measures which allowed the government to restrict imports from certain areas. For example, no Japanese cars or consumer electronics were allowed to be imported. Most of those restrictions were lifted as a consequence of the 1997 crisis. But they were in place for some 35 years which allowed the state to nurture and protect the growth of its large companies and for those companies to develop their markets, products, brands, etc. That said, South Korean firms do depend on Japanese technology still for some critical parts and components.
China of course had no real foreign direct investment or consumer imports until the reform period started in the late 1970s. The reform process over the 1980s promoted the marketization of Chinese state enterprises but still maintained barriers to most FDI and imports. It was in this period that Lenovo and other firms began to grow and dominate the domestic Chinese market. But by the early 1990s the Chinese government changed strategy and began to increasingly promote fdi and imports. As a result, foreign capital came in much earlier than in South Korea, making it far more difficult for Chinese firms to push ahead. This created a competition that has had a negative impact on Chinese technological development and capacity building. Many economists who study Chinese research and development find that China's leading firms rarely buy Chinese technology, which has weakened the country's national technological capacities, and much of the research and development spending is actually allocated to buying foreign technology. Thus, a lot of the country's technological strengths which post Mao-governments inherited are being eroded faster than new ones are being created. This is not to say that some Chinese companies will not become world class exporters or players in their fields, like Lenovo, but that it is not likely to come from domestic roots or promote national technological networks. Marty On 6/21/2010 10:26 AM, Michael Perelman wrote: > I asked quite a few people about the Lenovo puzzle -- why can't China > develop such a company on its own, while S. Korea has been very > successful in doing so? > > I never got a real answer from anybody, or even a sense that they > understood the question. > -- > Michael Perelman > Economics Department > California State University > Chico, CA 95929 > > Tel. 530-898-5321 > E-Mail michael at ecst.csuchico.edu > michaelperelman.wordpress.com > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
