How Does it Work?
Edited by Claudio Petti
Chapter 3: Upgrading Strategies of Electronics Firms Within the Regional Innovation System of the Pearl River Delta, Illustrated by the Example of Two Hong Kong Firms
Henning Kroll and Daniel Schiller SETTING THE CONTEXT FOR THE REGIONALSECTORALCASE STUDY The relevant regional context for this study is the Greater Pearl River Delta (GPRD), which consists of two different sub-regions: the special administrative region of Hong Kong and the nine cities of the adjacent Guangdong province on the Chinese mainland forming the Pearl River Delta (PRD) proper. A high degree of regional economic integration has taken place between the PRD and Hong Kong since the early 1980s, when, as a result of China’s opening up and reform policy, Hong Kong manufacturers started to relocate production activities to the PRD. Following the introduction of these new policies in 1978, the Pearl River Delta (PRD) has become a global centre of export-oriented manufacturing and the spearhead of China’s development. Today, the electronics industry is the dominant sector of the so-called ‘world factory’ in terms of production and exports. The region’s impressive export performance, however, is not matched by innovation capabilities in the enterprise sector – since many of the high-tech exports are in fact re-exports of imported technologies regionally assembled (Kroll and Tagscherer, 2009). Since electronics firms in the region thus mainly operate at the low-tech end of the value chain, the industry has recently been facing increasing pressure to upgrade and innovate, due to rising production costs and new government regulations (HKTDC, 2006; HKTDC, 2007). The emergence of and political support for more advanced innovation systems was initiated rather late, both in the PRD and in Hong Kong. Compared to...
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