NIRA Research Report No. 20010012

Study on Possibility of Creating the Knowledge Based Cluster in East Asia

Executive Summary

The East Asian countries have developed their industries helped by the step-by-step technology transfers based on the international direct investment from the advanced countries. This thesis is to make researches on what strategies the countries should work out from now on, focusing attention on the R & D divisions as the resources of technologies in those countries.

The industrial world in East Asian countries have been integrated by the penetration of foreign companies and the strategy of inviting the leading-edge industries from foreign advanced countries. However, they are still depending on the advanced countries, when it comes to the aspects of the brains, the R & D divisions, the business support service industries, and so on. For this reason, the business world of the leading-edge industries in East Asian countries has not yet grown out of its specialized function for production only. Until today, the integration of manufacturing industries as a production site, which is called "Industrial Cluster", has geographically brought forth the comparative advantage to East Asia. Thanks to the location in the integrated region, the manufacturers were able to manufacture high-quality and low-priced products with stability. They were able to secure their competitive edge in the world market. However, it is prospected that the other regions in the world will come up to compete with the East Asian production site in the future. It is because the other productions sites similar to the East Asian region have been newly built in other regions of the world as a result of globalization and the progression of ICT (Information and Communication Technology) innovation. In order to survive under the circumstances, it is important for the East Asian region to have the more competitive power than before. The region currently holding a comparative advantage needs to transform its industrial structure so that they can support their own industries by themselves independently without having affected by the movement of the foreign capital companies. At the same time the region needs to change and improve as a cluster to continuously bring about technological innovation by developing human resources as the brains of the region.

On the other hand, globalization and the progression of ICT innovation are going to transform the actual mechanism of the technical renovation in its quality and quantity. To deal with this new trend, it is not enough that they are integrated with the R & D capability merely to cause the technical renovation. They need to have a network established between various institutions including those intellectual resources in order to properly catch up with the expanded market and the fragmented needs. This required condition is exemplified by Silicon Valley where the comparative advantage of the region is supported by the network established between medium and small companies related to the R & D activities, which is build in as a kind of social infrastructure of the regional community. The technological innovation center such as Silicon Valley can be called "Knowledge based cluster", in comparison with the conventional "Industrial Cluster".

In this research, based on the recognition that it is necessary to form the knowledge based cluster for economic development of the East Asia in the future, I have surveyed how much extent the East Asian countries meet the conditions for formation of the knowledge based cluster. As the result of survey, I found that the science & technology parks to be used as a core to form the knowledge based cluster have been rapidly being built in each country. On the other hand, it was found that medium and small companies related to the R & D activities to play the main role of the knowledge based cluster have not been created nor nurtured enough. One particular point was realized after the survey that; whether the ratio of the R & D cost spent in a country is more than 1.0% of the country's GDP or less is a barometer to forecast if private companies in the country will grow or not. However, all the ASEAN countries excluding Singapore have not reached the 1.0% level. Thus it is the strategic challenge for those countries to focus on the R & D field. And, in order to promote the formation of the knowledge based cluster, the countries need to create medium and small companies associated with various R & D fields.

For creation of the R & D oriented medium and small companies in those countries, the following actions are required:

In view of the economic scale and other factors of the East Asian countries, it is not efficient for each country to tackle the subject by herself. That is because the country has a limitation in the ability to grasp the market movement focusing on the international market from the first stage, and also because of the limitations in the financial power and the R & D base of universities or research institutes in the country. Therefore it is deemed that the most effective measures for those countries are to tackle the various preparations for required conditions and to promote the mutual exchange of the market information through collaborations between the countries.

I think that those measures will make it possible for the East Asia to transform the present industrial structure into the networked and independent industrial structure to cope with globalization, and also to promote the establishment of the knowledge based cluster in the region. And I expect this cluster collaboration will lead to promote the creation of Knowledge and a new market in the East Asia.

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