Chapter 3 Knowledge Exchanges and Innovation in Connected Firms: Evidence from Upstream-Downstream Relationships

This paper proposes evidences for linking innovation and knowledge exchanges in developing economies towards a comprehensive theory of new economic geography in the knowledge based spatial economy. Firms which dispatched engineers to customers achieved more innovations than firms which did not. Mutual sharing of knowledge also stimulates innovations. A just-in-time relationship is effective for dealing with upgrading production process. But such strong complementarities with partners are not effective for product innovation.. These evidences support the hypothesis that face-to-face communication and complementarities among production linkages have different roles in knowledge creation.

Perfecting the Catching-up: The Case of Taiwan's Motorcycle Industry

The final stage of the catching-up process has formidable hurdles. This paper examines the case of Taiwan’s motorcycle industry and shows how latecomers overcame the hurdles. In the early 1990s, the two largest motorcycle makers in Taiwan, Sanyang and Kwang Yang, had completed the catching-up process and became independent from Honda, on which they had technologically depended since the early 1960s. The requisite for independence was acquiring the capacity for product innovation. The two assemblers could cultivate technological capacity by investing abundant resources, which they accumulated in the protected market. It should be noted that although the market was protected and highly concentrated, it was also very competitive. Another condition was the solid local suppliers of parts and components. The local suppliers had also grown under the government’s industrial policies. However, their development beyond imitators can be attributed to their own initiatives.

Linked versus Non-linked Firms in Innovation: The Effects of Economies of Network in Agglomeration in East Asia

This paper proposes a new mechanism linking innovation and network in developing economies to detect explicit production and information linkages and investigates the testable implications of these linkages using survey data gathered from manufacturing firms in East Asia. We found that firms with more information linkages tend to innovate more, have a higher probability of introducing new goods, introducing new goods to new markets using new technologies, and finding new partners located in remote areas. We also found that firms that dispatched engineers to customers achieved more innovations than firms that did not. These findings support the hypothesis that production linkages and face‐to‐face communication encourage product and process innovation.