Competitiveness, FDI and Technological Activity in East Asia
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Competitiveness, FDI and Technological Activity in East Asia

Edited by Sanjaya Lall and Shujiro Urata

This book addresses this imbalance with new country studies on the interaction between foreign direct investment (FDI) and technological activity in building export competitiveness. The book covers China, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand, highlighting different strategic approaches to building capabilities in industrial enterprises. The book also includes a general overview and studies of Japanese multinationals overseas.
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Chapter 11: Industrial technology transition in Malaysia

Rajah Rasiah


Rajah Rasiah1 1. INTRODUCTION The economic development literature has conceptualized technical change in different ways. While the issues involved are too complex to treat here in any detail, it is important to note that there are two opposing views. One is the traditional neoclassical view that treats technology as largely exogenous. Its advocates see a passive role for governments, with economies achieving the ‘natural’ rate of growth and structural change under free markets or, at most, with market-friendly interventions. The other view is that of evolutionary institutionalists, who emphasize the building of national capabilities as central to rapid growth and structural change. The proponents see a proactive, and in some cases selective, role for government interventions. List’s (1885) industrial policy argument to create dynamic comparative advantage was perhaps the earliest institutionalist effort to conceptualize the development of national innovation capabilities. Dynamic national innovation systems have helped nations transform comparative and competitive advantages (Gerschenkron, 1962; Kaldor, 1979; Lall, 1996). Given the qualitative attributes of the term ‘technology’, pioneering works in this field have deliberately left the national innovation system (NIS) open, with several agents (including organizations) playing important interactive and mutually supportive roles to develop nations’ productive capacities (Lundvall, 1985; Freeman, 1987; Nelson, 1985; Dosi, 1984). Technical change covers innovations, broadly defined, to include both the path-breaking inventions and the more mundane (but equally important) efforts by which firms introduce new manufacturing designs and processes, including minor improvements that are not entirely new to the universe. Firms...

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