43971 Public Disclosure Authorized DIRECTIONS IN DEVELOPMENT Public Disclosure Authorized Private Sector Development Growing Industrial Clusters in Asia Serendipity and Science Public Disclosure Authorized Shahid Yusuf, Kaoru Nabeshima, and Shoichi Yamashita, Editors Public Disclosure Authorized Growing Industrial Clusters in Asia Growing Industrial Clusters in Asia Serendipity and Science Edited by Shahid Yusuf, Kaoru Nabeshima, and Shoichi Yamashita © 2008 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] All rights reserved 1 2 3 4 11 10 09 08 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. ISBN: 978-0-8213-7213-5 eISBN: 978-0-8213-7214-2 DOI: 10.1596/978-0-8213-7213-5 Cover photo: Gary L. Friedman (www.FriedmanArchives.com) Library of Congress Cataloging-in-Publication Data has been requested. Contents Preface xi Contributors xiii Abbreviations xv Chapter 1 Can Clusters Be Made to Order? 1 Shahid Yusuf Chapter 2 Lessons from the Development of Silicon Valley and Its Entrepreneurial Support Network for Japan 39 Martin Kenney Chapter 3 The Emergence of Hsinchu Science Park as an IT Cluster 67 Tain-Jy Chen Chapter 4 Coping with Globalization of Production Networks and Digital Convergence: v vi Contents The Challenge of ICT Cluster Development in Singapore 91 Poh-Kam Wong Chapter 5 Bangalore Cluster: Evolution, Growth, and Challenges 147 Rakesh Basant Chapter 6 ICT Clusters and Industrial Restructuring in the Republic of Korea: The Case of Seoul 195 Sam Ock Park Chapter 7 Constructing Jurisdictional Advantage in a Mature Economy: The Case of Kitakyushu, Japan 217 Maryann P. Feldman Chapter 8 Kitakyushu: Desperately Seeking Clusters 243 Kaoru Nabeshima and Shoichi Yamashita Index 269 Boxes 4.1 Vision, Goals, and Strategy of iN2015 133 5.1 Sources of Knowledge in Industrial Clusters 149 Figures 2.1 Genealogy of Silicon Valley Technologies: Stanford University, Hewlett-Packard, University of California–Berkeley, Xerox PARC, IBM San Jose, and University of California–San Francisco 46 Contents vii 2.2 Employment in Four Bay Area Counties, 1959–2001 47 2.3 Establishments in Four Bay Area Counties, 1959–2001 47 3.1 Percentages of Sales of Integrated Circuits and Computers and Peripherals in Hsinchu Science Park, 1984–2003 72 4.1 Conceptual Framework of Information Economy 93 5.1 Cluster Characteristics, Links, Policies, and Knowledge 151 6.1 Distribution of ICT-Related Firms in Seoul, 1999–2003 206 6.2 Sources of Codified Knowledge of Product and Process Technology 208 6.3 Sources of Tacit Knowledge of Product and Process Technology 209 7.1 Photovoltaic Industry Production Chain and Various Support Services 231 8.1 Automobile Production in Kyushu, 1993–2005 252 8.2 Trends in Automotive Parts Production in Kyushu, 1981–2003 254 8.3 Targeted Areas of Semiconductor Firms in Kyushu, 2003–05 256 Tables 1.1 Markusen’s Typology of Industry Clusters 5 viii Contents 1.2 State-Level Industrial Promotion Policies in the United States 14 1.3 Patents Granted by the U.S. Patent and Trademark Office to Selected Economies, 1963–2006 27 3.1 Statistics of Hsinchu Science Park, 1981–2004 71 3.2 Growth of Combined Sales by Industry, 1984–2004 73 4.1 Electronics Manufacturing Industry Growth in Singapore, 1960–2004 96 4.2 Singapore’s Share of World Electronics Production, 1985–2004 98 4.3 Singapore Electronics Domestic Exports, 1980–2004 99 4.4 Sectoral Composition of Value Added in Singapore’s Electronics Industry, 1970–2004 99 4.5 Top 20 Electronics Manufacturing Companies in Singapore, 1991–92 101 4.6 Top 20 Electronics Manufacturing Companies in Singapore, 2003 102 4.7 U.S. Patent and Trademark Office Patents in ICT and Electronics Granted to Singapore-Based Inventors by Nationality of Assignee, 1976–2004 103 4.8 Top USPTO ICT and Electronics Patent Holders of Singapore, 1976–2004 104 4.9 Sectoral Composition of Value Added of Singapore’s ICT Industry, 1986–2003 105 4.10 ICT Services Industry Growth in Singapore, 1986–2003 107 Contents ix 4.11 Sectoral Composition of Value Added of Singapore’s ICT Services Industry, 1991–2003 108 4.12 Number of New Firms Registered in Electronics and ICT Industries, 1998–2004 109 4.13 Top 20 ICT Services Companies in Singapore, 1991–92 110 4.14 Top 20 ICT Services Companies in Singapore, 2003 111 4.15 Information Communication Use in Singapore, Households, 1988–2004 112 4.16 Selected ICT Diffusion Indicators for Singapore, 1990–2004 113 4.17 International Comparison: IT as Percentage of GDP, 1999 114 4.18 Ranking of Singapore in the Information Society Index, 1999–2004 115 4.19 Broadband Market Data as of December 31, 2004 118 4.20 China’s Rising Share in Electronics Exports to the United States, Japan, and the European Union, 1989–2004 131 4.21 Major Recent Foreign Investments in Singapore ICT Manufacturing and ICT Services Industries, 2002–05 134 5.1 Summary of the Determinants of Knowledge Flows in Geographically Bound Clusters 152 5.2 Summary of Responses from Cluster and Noncluster Firms in IT and Electronics Industries about the Perceived Advantages of Locating in a City Cluster 153 5.3 Summary of Policy Changes Contributing to the Emergence and Growth of the Bangalore Industrial Cluster 155 5.4 Firms Facing Infrastructure Constraints 164 5.5 IT Firms Adopting Various Processes 172 5.6 IT Firms Adopting Various Practices 173 5.7 Electronic Firms Adopting Various Processes and Practices 173 5.8 Number of Networks for Electronics Firms: Weighted Means and Standard Deviations 175 5.9 Number of Networks for IT firms: Weighted Means and Standard Deviations 176 5.10 Performance of Electronics Firms 177 5.11 Performance of IT Firms 177 6.1 Regional Share of .kr Domains and B2B e-Commerce Sites 202 6.2 Distribution of ICT Firms in Seoul, 1999 and 2003 203 7.1 Global Market Share of Photovoltaic Modules, 2004 229 7.2 Recent Investments in Photovoltaic Module Production in Japan, 2003–07 229 7.3 Comparison between Crystalline Silicon and Amorphous Silicon 230 7.4 Inventive Strength in Kitakyushu 233 7.5 Are Private and Public Sector Activities Complementary? 235 8.1 Rates of Automotive Parts Procurement 253 Preface As competition increases within an ever more globalized world, the appeal of industrial clusters not only remains strong but has become even more urgent. Policy makers in both developed and developing countries are searching for better ways to create new clusters, sustain existing ones, and revive those that are losing their vigor. But even after almost three decades of research, the formation and maintenance of dynamic industrial clusters remain something of a mystery. This book is part of the ongoing effort by researchers to unravel that mystery. The question underlying the entirety of the book is, “Can viable clus- ters be called into existence by dint of policy?” The authors go about answering this question by examining the experience of clusters— including policies employed to induce their formation—in Asia and the United States. Their analysis results in a wealth of insights into the dynamics of clusters and helps to identify many of the conditions neces- sary for their formation. These findings, along with the detailed evidence from which they are derived, will be particularly valuable to policy makers and development specialists. While we believe that this book moves us closer to the science of cluster building, it is nonetheless obvious that there is much work yet for others to do. However, we hope that this volume will make their task a little easier. xi xii Preface The chapters in this volume were initially prepared for the conference “ICT Industrial Clusters in Asia and the Problems in Japan,” held in the City of Kitakyushu, Japan, on December 14–16, 2005. The papers were subse- quently revised and updated by the authors based on the comments received from conference participants and other suggestions. Our thanks to all those who have helped us improve the contents. The conference was organized by the City of Kitakyushu and the International Centre for the Study of East Asian Development (ICSEAD), Kitakyushu, supported by the Council of Local Authorities for International Relations, the World Bank, and the Asian Development Bank.