The Political Economy of Automotive Industrialization in East Asia

## Abstract This book offers a political economy explanation for the striking cross-national differences in strategies and performance among East Asia’s automotive industries. Some countries—China, South Korea, and Taiwan—have successfully pursued “intensive” growth strategies by increasing local value added based on domestic inputs and technological competencies. Malaysia has attempted but failed to pursue this path. In contrast, Thailand has become a champion of “extensive” growth, relying on foreign assemblers and their suppliers to achieve an impressive expansion of production, assembly, and exports. Latecomer Indonesia has followed Thailand with some success, whereas the Philippines has remained an automotive backwater. Through cross-case and within-case analyses of the seven countries, the book argues that variation is a function of the institutional and political contexts in which firms operate. Different strategies require different institutions and institutional capacities. Intensive development is especially institutionally demanding. Effective institutions emerge when political leaders face severe claims on resources (security threats and domestic pressures for welfare improvement) in the absence of easily accessible revenues to satisfy such needs. Brief comparisons with Brazil, Mexico, and other developing countries confirm the utility of the analytic framework. This explanation is superior to neoclassical accounts. It is consistent with but provides more insight than other prominent approaches to development: national innovation systems, global value chains, and developmental states. New challenges facing auto assemblers and suppliers, such as the transition to electric and autonomous vehicles, will call heavily upon the institutional capacities highlighted in this book. East Asia is a powerhouse of automobile production. Yet, across the region, national automobile industries have had strikingly different patterns of development. Despite starting from equally low levels of performance and initially similar strategies, countries have experienced vastly different results. From Thailand's success as an assembly hub for foreign automakers and China's unexpected achievements in building its own car industry, to South Korea's impressive development of an integrated industry, to the Philippines' persistent weakness, these divergent paths offer a fascinating window into the determinants of economic growth.The Political Economy of Automotive Industrialization in East Asia provides a political explanation for why development strategies and performance have been so uneven within one of the world's most important regions. Utilizing interviews and original-language research from multiple nations, this book explains that factors such as market size and neoclassical economic policies alone cannot explain these patterns of development. Richard F. Doner, Gregory W. Noble, and John Ravenhill instead highlight the significance of two sets of factors: countries' very different capabilities for implementing policies and the political forces that help to explain the emergence of effective institutions. Through cross-national analyses of China, Taiwan, South Korea, Indonesia, Malaysia, the Philippines, and Thailand, the book sets up a clear structure for understanding industrial development and how it enables or constrains the capabilities of domestic firms. Brief comparisons with Brazil, Mexico, and other developing countries confirm the utility of the analytic framework and demonstrate how it is superior both to accounts in mainstream economics and much of political science, which fail to give sufficient emphasis to the role of public and public-private institutions, or provide an explanation of the political bases of those institutions.In a world where auto assemblers and suppliers are facing new challenges in an ever-evolving industry--such as the transition to electric and autonomous vehicles--this book offers a crucial perspective on the centrality of institutional capacities and political economy. By tracing the divergent trajectories of seven nations, The Political Economy of Automotive Industrialization in East Asia offers lessons beyond the automobile industry that illustrate the broader importance of institutions to economic growth. East Asia is a powerhouse of automobile production. Yet, across the region, national automobile industries have had strikingly different patterns of development. Despite starting from equally low levels of performance and initially similar strategies, countries have experienced vastly different results. From Thailand's success as an assembly hub for foreign automakers and China's unexpected achievements in building its own car industry, to South Korea's impressive development of an integrated industry, to the Philippines'persistent weakness, these divergent paths offer a fascinating window into the determinants of economic growth. The Political Economy of Automotive Industrialization in East Asia provides a political explanation for why development strategies and performance have been so uneven within one of the world's most important regions. Utilizing interviews and original-language research from multiple nations, this book explains that factors such as market size and neoclassical economic policies alone cannot explain these patterns of development. Richard F. Doner, Gregory W. Noble, and John Ravenhill instead highlight the significance of two sets of factors: countries'very different capabilities for implementing policies and the political forces that help to explain the emergence of effective institutions. Through cross-national analyses of China, Taiwan, South Korea, Indonesia, Malaysia, the Philippines, and Thailand, the book sets up a clear structure for understanding industrial development and how it enables or constrains the capabilities of domestic firms. Brief comparisons with Brazil, Mexico, and other developing countries confirm the utility of the analytic framework and demonstrate how it is superior both to accounts in mainstream economics and much of political science, which fail to give sufficient emphasis to the role of public and public-private institutions, or provide an explanation of the political bases of those institutions. In a world where auto assemblers and suppliers are facing new challenges in an ever-evolving industry--such as the transition to electric and autonomous vehicles--this book offers a crucial perspective on the centrality of institutional capacities and political economy. By tracing the divergent trajectories of seven nations, The Political Economy of Automotive Industrialization in East Asia offers lessons beyond the automobile industry that illustrate the broader importance of institutions to economic growth. East Asia is a powerhouse of automobile production. Yet, across the region, national automobile industries have had strikingly different patterns of development. Despite starting from equally low levels of performance and initially similar strategies, countries have experienced vastly different results. From Thailand's success as an assembly hub for foreign automakers and China's unexpected achievements in building its own car industry, to South Korea's impressive development of an integrated industry, to the Philippines' persistent weakness, these divergent paths offer a fascinating window into the determinants of economic growth. The Political Economy of Automotive Industrialization in East Asia provides a political explanation for why development strategies and performance have been so uneven within one of the world's most important regions. Utilizing interviews and original-language research from multiple nations, this book explains that factors such as market size and neoclassical economic policies alone cannot explain these patterns of development. Richard F. Doner, Gregory W. Noble, and John Ravenhill instead highlight the significance of two sets of factors: countries' very different capabilities for implementing policies and the political forces that help to explain the emergence of effective institutions. Through cross-national analyses of China, Taiwan, South Korea, Indonesia, Malaysia, the Philippines, and Thailand, the book sets up a clear structure for understanding industrial development and how it enables or constrains the capabilities of domestic firms. Brief comparisons with Brazil, Mexico, and other developing countries confirm the utility of the analytic framework and demonstrate how it is superior both to accounts in mainstream economics and much of political science, which fail to give sufficient emphasis to the role of public and public-private institutions, or provide an explanation of the political bases of those institutions. In a world where auto assemblers and suppliers are facing new challenges in an ever-evolving industry—such as the transition to electric and autonomous vehicles—this book offers a crucial perspective on the centrality of institutional capacities and political economy. By tracing the divergent trajectories of seven nations, The Political Economy of Automotive Industrialization in East Asia offers lessons beyond the automobile industry that illustrate the broader importance of institutions to economic growth. "This book offers a political economy explanation for the striking cross-national differences in strategies and performance among East Asia's automotive industries. Some countries - China, South Korea, and Taiwan - have successfully pursued "intensive" growth strategies by increasing local value-added based on domestic inputs and technological competencies. Malaysia has attempted but failed to pursue this path. In contrast, Thailand has become a champion of "extensive" growth, relying on foreign assemblers and their suppliers to achieve an impressive expansion of production, assembly, and exports. Latecomer Indonesia has followed Thailand with some success, whereas the Philippines has remained an automotive backwater. Through cross-case and within-case analyses of the seven countries, the book argues that variation is a function of the institutional and political contexts in which firms operate. Different strategies require different institutions and institutional capacities. Intensive development is especially institutionally demanding. Effective institutions emerge when political leaders face severe claims on resources (security threats and domestic pressures for welfare improvement) in the absence of easily accessible revenues to satisfy such needs. Brief comparisons with Brazil, Mexico, and other developing countries confirm the utility of the analytic framework. This explanation is superior to neoclassical accounts. It is consistent with but provides more insight than other prominent approaches to development: national innovation systems, global value chains, and developmental states. New challenges facing auto assemblers and suppliers, such as the transition to electric and autonomous vehicles, will call heavily upon the institutional capacities highlighted in this book"-- Provided by publisher East Asia is a powerhouse of automobile production. Yet, across the region, national automobile industries have had strikingly different patterns of development. Despite starting from equally low levels of performance and initially similar strategies, countries have experienced vastly different results. From Thailand's success as an assembly hub for foreign automakers and China's unexpected achievements in building its own car industry, to South Korea's impressive development of an integrated industry, to the Philippines' persistent weakness, these divergent paths offer a fascinating window into the determinants of economic growth. This title provides a political explanation for why development strategies and performance have been so uneven within one of the world's most important regions Introduction -- The Lure and Challenges of the Automobile Industry -- Institutions, Politics and Developmental Divergence -- Thailand: Early opening and Export success -- The Philippines and Indonesia: Extensive Development Arrested and Delayed -- Korea: Successful Intensive Industrialization -- Malaysia: How Intensive Development Strategies Fail in the Absence of Appropriate Institutions -- China: Revamping socialist institutions for a market economy -- Taiwan: Balancing independent assembly, MNCs, and parts promotion in a small market -- Conclusion