Chapter 6:

Industry, Technology, and Competitiveness in the Marketplace

New High-Tech Exporters

The previous sections identified several nations that have made tremendous technological leaps forward over the past decade. Some of these countries appear to be well-positioned to play even more important roles in technology development in the near future based on their often large and continuing investments both in science and engineering education and R&D. However, their level of participation may also hinge on other factors, among them political stability, access to capital, and the ability to complete a level of infrastructure that can support technological and economic advancement.

This section presents an assessment of future national competitiveness in high-technology industries for newly industrialized economies in Asia and in three transitioning economies-Hungary, Poland, and Russia. This competitiveness is gauged through scores on the following leading indicators:

These four indicators were designed to identify countries that have the potential to become more important exporters of high-technology products over the next 15 years. This section analyzes 12 economies using these indicators: 9 within Asia (Singapore, South Korea, Taiwan, China, India, Indonesia, Malaysia, the Philippines, and Thailand); 2 Central European nations (Hungary and Poland); and Russia.[35] 

Because Singapore, South Korea, and Taiwan have already shown impressive capabilities as exporters of high-technology products, they are often referred to as newly industrialized economies. The six remaining Asian economies are less developed technologically and are considered emerging Asian economies in this section. The three Central and Eastern European nations-Hungary, Poland, and Russia-are actively pursuing market-based reforms and are collectively referred to as transitioning economies. For this model of indicators, the Asian newly industrialized economies become the benchmark to compare expectations and technological capabilities for the other nine.[36] 

National Orientation top

The national orientation indicator attempts to identify those nations whose business, government, and cultural orientation encourage high-technology development. This indicator was constructed using information from a survey of international experts and published data. The survey asked the experts to rate national strategies promoting high-tech development, social influences favoring technological change, and entrepreneurial spirit. Published data were used to rate each nation's risk factor for foreign investment over the next five years (see Frost and Sullivan 1996).

The newly industrialized Asian economies posted the highest overall scores on this indicator, with Taiwan just edging out Singapore. (See figure 6-27 and appendix table 6-23.) Entrepreneurial spirit was rated much higher for Taiwan than for Singapore. This rating, derived from expert opinion, elevated Taiwan's overall score above Singapore's-despite Taiwan scoring lower than Singapore on each of the other components. While South Korea scored lower than the other two Asian "tigers" on each of the components that make up this indicator, its composite score was largely compromised by its rating as a riskier place for foreign investment than either Taiwan or Singapore.

Malaysia's national orientation toward achieving future technological competitiveness was rated far above the other emerging Asian economies and the transitioning economies in Central Europe and Russia. Across the full range of variables considered, Malaysia's scores were consistently and significantly higher than the other countries in this second group and were well within the range of scores accorded the more advanced newly industrialized Asian economies. The Philippines also scored well, with strong scores in each of the indicator components, elevating it to the second highest score among the emerging Asian economies and other transitioning economies in Central Europe.

Scores tended to converge for the remaining Asian and Central European economies, although each country's composite score is built on different strengths. Scores for Poland and Hungary were slightly higher than those for China and Thailand. Published data rated the two Central European nations a better risk for foreign investment than China, and the surveyed experts gave an edge to Poland and Hungary over Thailand on "entrepreneurial spirit."

Russia received the lowest composite score of the 12 economies examined. Two variables contributed to this standing: Russia was considered a riskier or less attractive site for foreign investment than the other countries, and the experts accorded Russia a low score on its entrepreneurial spirit.

Socioeconomic Infrastructure top

This indicator assesses the underlying physical, financial, and human resources needed to support modern technology-based nations. It was built from published data on population percentages in secondary schools and in schools of higher education[37]  and from survey data evaluating the mobility of capital and the extent to which foreign businesses are encouraged to invest and/or do business in that country.

Taiwan and Singapore are in a virtual tie and once again received the highest scores among the group of newly industrialized and emerging economies. In addition to strong track records on general and higher education, Taiwan and Singapore reflect high expert ratings for variables comparing the mobility of capital and for their encouragement of foreign investment. (See figure 6-27.) South Korea's overall indicator score trailed these two leaders, especially with regard to the two expert-derived variables.

Among the emerging and transitioning economies, the Philippines once again scored surprisingly well, outscoring even Malaysia. The rating for the Philippine socioeconomic infrastructure was bolstered by a stronger showing in the published education data and in the experts' higher opinion of mobility of capital in the Philippines.

Indonesia received the lowest composite score of the 12 economies examined. It was held back by low marks on two of the three variables: educational attainment-in particular, enrollments in tertiary education-and its encouragement of foreign-owned business and investment.

Technological Infrastructure top

Five variables were used to develop this indicator, which evaluates the institutions and resources that contribute to a nation's capacity to develop, produce, and market new technology. This indicator was constructed using published data on the number of scientists in R&D; published data on national purchases of electronic data processing equipment; and survey data that asked experts to rate the nation's capability to train citizens locally in academic S&E, the ability to make effective use of technical knowledge, and the linkages of R&D to industry.

Russia received the highest composite score of the group of newly industrialized or transitioning economies examined here. (See figure 6-27.) Russia's score on this indicator was elevated by its large number of trained scientists and engineers, the size of its research enterprise, and its contribution to scientific knowledge-especially as compared with the smaller, less populous nations in Asia and Central Europe. Russia's composite score was more similar to mid-level Western European scores on this indicator. (See appendix table 6-23.) Poland also scored well, bolstered more by experts' rating of the quality of that country's scientists and engineers and its capacity to train new scientists and engineers, rather than on the sheer number of those professionals residing within the country.

The three Asian tigers-Singapore, South Korea, and Taiwan-compiled similar scores. Singapore scored relatively well vis-a-vis the other Asian tigers, given its small population.

The population effect shows up again in the scores of the remaining countries analyzed here. China and India both scored well, leading the other emerging and transitioning economies. Indonesia's large population, however, did not save it from the bottom ranking. It earned low scores on each of the variables making up this indicator.

Productive Capacity top

This indicator evaluates the strength of a nation's current, in-place manufacturing infrastructure as a baseline for assessing its capacity for future growth in high-tech activities. It factors in expert opinion on the availability of skilled labor, numbers of indigenous high-tech companies, and management capabilities, combined with published data on current electronics production in each economy.

Singapore's productive capacity scored highest among the three Asian tigers, surpassing South Korea and Taiwan by virtue of experts' high opinion of this country's pool of labor and management personnel. (See figure 6-27.) India and the Philippines both scored quite high-in fact, their composite scores were closer to Taiwan's than to any in the group of emerging or transitioning economies. India's score was elevated by its comparatively large electronics manufacturing industry and-once again-by its tradition of training its students in science and engineering. The Philippines' score also stands out. As with Singapore, experts gave high marks to the pool of skilled labor and management talent in the Philippines. That country's scores were on a par with those received by the three Asian tigers. Although Indonesia's score for production of electronics products-this indicator's published data variable-was between that of India and the Philippines, its scores from experts rating the quality of labor and management were very low.

This model of indicators provides a systematic approach for comparing future technological capability on an even wider set of nations than might be available using other indicators. The results highlight a broadening of the group of nations that may compete in high-tech markets in the future, while also giving perspective to the large differences between several of the emerging and transitioning economies and those considered newly industrialized.

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[35] See Porter and Roessner (1991) for details on survey and indicator construction; see Roessner, Porter, and Xu (1992) for information on the validity and reliability testing the indicators have undergone.

[36] Although not discussed in this section, indicator scores for Argentina, Brazil, Mexico, Venezuela, and South Africa are presented in appendix table 6-23.

[37] The Harbison-Myers Skills Index (which measures the percentage of population attaining secondary and higher educations) was used for these assessments. See World Bank (1996).

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