MIAMI UNIVERSITY The Graduate School CERTIFICATE FOR APPROVING THE DISSERTATION We hereby approve the Dissertation Of Irina Aervitz Candidate for the Degree: Doctor of Philosophy Director (Dr. John M. Rothgeb) Reader (Dr. Walter Arnold) Reader (Dr. Venelin I. Ganev) Graduate School Representative (Dr. Margaret Ziolkowski) ABSTRACT THE DRIVING FORCE BEHIND THE AUTOMOTIVE SECTOR IN CHINA AND RUSSIA: THE ROLE OF THE STATE IN TECHNOLOGY APPROPRIATION by Irina Aervitz The focus of this study is automobile industry in China and Russia. Specifically I am looking at the state attempts to encourage technology development in the automobile sector. My goal is to look for variations in the overall policy environment created by the state with regard to technology enhancement in the automobile industry in China and Russia and particularly focus on policy implementations at the enterprise level by observing the way enterprises appropriate technology by using various sources of technology appropriation provided by the state policies. I believe that this research is important because it reviews the literature on the role of the state in industrial development and introduces the concept of “technology appropriation.” Technology appropriation lies in the heart of the companies’ technological competitiveness and is based on the sources of technology made available to companies by the regulatory environment created by the state. Most importantly, this project offers analysis of the empirical data collected during a series of interviews in the domestic and foreign enterprises operating in both countries. This analysis attempts to lift the “curtain” over the companies’ technology-oriented strategies and the way they take advantage of the existent state policies affecting the process of technology appropriation. THE DRIVING FORCE BEHIND THE AUTOMOTIVE SECTOR IN CHINA AND RUSSIA: THE ROLE OF THE STATE IN TECHNOLOGY APPROPRIATION A DISSERTATION Submitted to the Faculty of Miami University in partial fulfillment of the requirements for the degree of Doctor of Philosophy Department of Political Science by Irina Aervitz Miami University Oxford, Ohio 2007 Dissertation Director: Dr. John Rothgeb © Irina Aervitz 2007 CONTENTS Chapter I.......................................................................................................................1 Introduction.....................................................................................................................1 Literature Review ...........................................................................................................6 Institutional and Social-structural Theories .................................................6 Those Who “Brought the State Back” ............................................6 Embeddedness Literature ................................................................8 The Developmental State................................................................10 Alternative Theories ......................................................................................12 Neoclassical Economists .................................................................12 Cultural Argument .........................................................................14 Theoretical Framework................................................................................................15 Independent Variable ...................................................................................................18 Terminology: Technology Appropriation ....................................20 Notes on Methodology ..................................................................................................24 Case-Oriented Comparative Method............................................24 Case Selection and Interviews........................................................26 Interview as a Method ....................................................................30 Dependent Variable ......................................................................................................30 Chapter II ...................................................................................................................31 Comparing Russia and China .....................................................................................31 Automobile Industry Development in Russia: Historic Overview ..........................32 iii Automobile Industry Development in China: Historic Overview ...........................37 Conclusion .....................................................................................................................42 Chapter III.................................................................................................43 Policies Regarding Technology Development in Russia............................................45 Development Strategy of the Automobile Industry ....................................45 State Protectionist Measures.........................................................................46 Science & Technology Research and Development System in Russia ......47 Investment Policies.........................................................................................51 Investment at the Local Level........................................................53 Institutional and Other Barriers to Investment...........................55 Implications for Technology Appropriation ...............................................57 Policies Regarding Technology Development in China.............................................60 Foreign Companies and Technology Transfer............................................60 National-level Science & Technology (S&T) Research and Development System......................................................................................62 Structure of S&T System ...............................................................62 Automotive Industry as a “Pillar” Industry.................................66 Special economic zones and R&D ................................................................67 Intellectual Property Rights and International Agreements .....................69 Implications for Technology Appropriation ...............................................71 Conclusion .....................................................................................................................73 Chapter IV..................................................................................................................76 Sources of Technological Development in China – Introduction .............................76 iv Case of Foton Motors and Sources of Technology.....................................................81 Purchase of Technology.................................................................................82 Purchase of Consulting Services...................................................................85 Type of Technology........................................................................................86 Support from the State ..................................................................................87 Allocation of Finances from Investors .........................................................87 Foton and R&D..............................................................................................88 Sources of Technology Appropriation from Foreign Partners................................89 Technology Transfer from Foreign Companies via Joint Ventures .........89 Shanghai GM...................................................................................90 Beijing Jeep Corporation ...............................................................91 FAW/Volkswagen ...........................................................................92 Policies Encouraging Localization................................................................94 Export Encouragement .................................................................................95 Conclusion .....................................................................................................................96 Chapter V ..................................................................................................98 Sources of Technological Development in Russia – Introduction ............................98 Volga Automotive Plant (AvtoVAZ ..........................................................................103 Historic Overview ........................................................................................103 State Subsidies or other Forms of Financial Support...............................105 Allocation of Finances from Investors .......................................................106 AvtoVAZ own R&D Programs...................................................................106 Technology Transfer from Foreign Companies via Joint Ventures .......107 v Kama Automotive Plant (KAMAZ)..........................................................................108 Historic Overview ........................................................................................108 State Subsidies or other Forms of Financial Support...............................110 KAMAZ own R&D Programs ....................................................................111 Technology Transfer from Foreign Companies via Joint Ventures .......112 Sources of Technology Appropriation from Foreign Companies .........................114 Foreign Auto Enterprises and Localization Policies.................................114 GM in Russia.................................................................................114