A Case Study of the Asian Shipbuilding Industry

SeoulJournalofBusinessVolume15,Number2(Dec2009)TechnologicalCatching-upandLatecomerStrategy:ACaseStudyoftheAsianShipbuildingIndustryEUNHEESOHN*1MITCambridge,USASUNGYONGCHANG**SeoulNationalUniversitySeoul,KoreaJAEYONGSONG***SeoulNationalUniversitySeoul,KoreaAbstractThispaperinvestigatestheroleofimitationandinnovationintechnologicalcatching-up.Ontheonehand,excessiveinnovationandnoimitationcanneverprovidelatecomerswithabsorptivecapacitytoembarkoncatching-upalongtheexistingtechnologicaltrajectory.Ontheotherhand,excessiveimitationandnoinnovationcandebilitatetheabilityoflatecomerfirmstoleapfrogincumbentsbycreatinganewtrajectoryandfurtherreducingthetechnologicalgap.Thus,wearguethatsuccessfultechnologicalcatching-upinthelongtermcanhardlybeachievedwithoutafinebalancebetweenimitationandinnovationattheearlystageofcatching-up.Wealsoproposethatoccurrenceoftechnologicaluncertaintyatthelaterstageofcatching-upallowslatecomerswithsuchbalanceto*Mainauthor,Ph.D.Student,SloanSchoolofManagement,MIT([e-mail])**Coauthor,MasterCandidate,TheCollegeofBusinessAdministration,SeoulNationalUniversity([e-mail])***CorrespondingAuthor,ProfessorofInternationalBusiness,TheGraduateSchoolofBusiness&theCollegeofBusinessAdministration,SeoulNationalUniversity([e-mail])Acknowledgement:ThisresearchwasfundedfromtheInstituteofManagementResearchatSeoulNationalUniversity.26SeoulJournalofBusinessrealizeradicaltechnologicalleapfrogging.Byconductingacasestudyontheshipbuildingindustryinthe20thcentury,wefindsupportingevidencethatvalidatesourargument.Keywords:Technologicalcatching-up,latecomerstrategy,imitation,learningmyopia,technologyregime,shipbuildingindustryINTRODUCTIONTherapidtechnologicalcatching-upachievedbytheEastAsianeconomiesinlate20thcentury,hasboostedalargeamountofresearchonthemechanismsbehindthesephenomenaoftechnologicalcatching-up(LeeandLim2001).Howeverinfact,suchrapidtechnologicalcatching-upasfoundinEastAsiancountriessuchasKoreaandTaiwan,isnotaphenomenoncommonlyfoundinotherlatecomereconomiesortechnologicalsectors.AsCantwell(1989)argued,mostindustriesratherremaindominatedbyafewcountriesoverlongperiodsoftime.Anexplanationforthispersistenceinleadershipisprovidedbytheendogenousgrowththeory,whichsuggeststhattechnologicalcatching-upisdifficultbecauseoftheincreasingreturntoscaleofphysicalandhumanresourcesandthegeographicallocalizationoftechnology(Romer1990).Despitesuchgloomypredictionsfromthenewgrowththeories,KoreaandTaiwanindeedstandoutasexamplesoflatecomersthatsucceededtocatchupwithadvancednations.Transferofforeigntechnologyhashistoricallyplayedanimportantroleinthetechnologicalcatching-upofKoreaandTaiwan(FreemanandSoete1997;Song,Almeida,andWu2001).Lookingbackattheirsuccessesinthesemiconductorandconsumerelectronicsindustry,wecanfindthattheselatecomerssuccessfullytransitioned“fromimitationtoinnovation”-adoptingandassimilatingforeigntechnologyinordertocreateindigenoustechnology(Kim1997).Theshipbuildingindustryisyetanotherrepresentativeexampleoftechnologicalcatching-upundertakenbylatecomerEastAsiancountries.Japan,itselfoncealatecomerintheglobalshipbuildingindustry,caughtupwiththeEuropeanincumbentsinthe1950s,replacingBritainasthenewnumberone.Sincethen,Japanhadbeenreigningovertheindustryforalmost40years.Koreaonlyenteredtheglobalshipbuildingmarketinthe1970sasalatecomerTechnologicalCatching-upandLatecomerStrategy27toJapan.Inthe2000s,KoreacaughtupwithJapanandroseastheleader,boastingcutting-edgetechnologyinmanufacturingofspecializedvesselsandoffshorestructures.However,TaiwanandChina,whichenteredtheshipbuildingindustryataboutthesametimeunderequallyactivegovernmentalsupportandintervention,failtoachievesuchtechnologicalmaturity.Thisphenomenonbringsupaninterestingquestionofwhatdeterminesthesuccessoftechnologicalcatching-up.Korea’stechnologicalsuccessintheshipbuildingindustryandcontrastingfailuresofTaiwanandChinaprovideuswithanidealsettingtounderstandthedriveroftechnologicalcatching-up.BydelvingintothehistoryoftheAsianshipbuildingindustry,preciselythatofJapan,Korea,TaiwanandChina,thisstudylooksathowdifferentstrategicchoicesregardingimitationandinnovationleadtodifferingdegreesoftechnologicalcatching-up.Inthispaper,wesuggestthatthedifferentresultsintechnologicalcatching-upwereduetothe“dual”effectofimitationstrategy.Drawingontheabsorptivecapacityviewandthepath-dependenceview,weanalyzethedualnatureofimitationstrategyandproposeatheoryaboutlatecomer’stechnologicalcatching-up.Atanearlystageofcatching-up,imitationisindispensibleforfastlearningandsurvival.Adheringtoself-exploringinnovationTable1.WorldShipbuildingMarketShareinTermsofConstructionVolume*(unit:%)Ranking19551965197519851998200020051Britain(18.3)Japan(43.9)Japan(50.1)Japan(52.3)Japan(42.0)Korea(40.7)Korea(35.2)2Norway(14.5)Sweden(9.6)Germany(7.1)Korea(14.4)Korea(28.9)Japan(39.0)Japan(28.6)3Germany(9.9)Britain(8.8)Sweden(6.9)Germany(3.1)China(4.8)Germany(3.3)China(14.5)4France(4.7)Germany(8.4)Spain(4.6)Spain(3.0)Germany(4.2)China(3.2)Germany(3.6)5Japan(4.6)France(3.9)Britain(3.6)France(