Digital Dragon: High-Technology Enterprises in China

Digital Dragon: High-Technology Enterprises in China, by Adam Segal. Ithaca: Cornell University Press, 2003. xiii + 188 pp. US$35.00 (hardcover). The information technology (IT) industry has become one of the fastest growing sectors in China. In Digital Dragon, Adam Segal examines a significant growth engine of this industry-the non-governmental or minying firms. These are indigenous enterprises that operate outside of government control, but in many cases they are spin-offs from various government agencies, mainly academic institutions, and hence have a hybrid ownership structure. The book addresses the state's role in economic development by throwing a spotlight on its policies toward these generally small but robust private and quasi-private business concerns. Segal argues that the state plays a significant role in building a market-supporting framework for industry, and this is especially true for high-tech industries. However, the positive contribution of the state is conditional. Past institutional arrangements and enduring non-market-oriented economic beliefs produce varied outcomes. Segal illustrates this point by stressing the regional variations in the role of the state in a country as large as China. Instead of the central state, local governments are the key to China's patterns of development. Segal examines this by comparing and contrasting the development of IT industry in four of China's cities-Beijing, Shanghai, Xi'an and Guangzhou. These four case studies provide a clear idea of how local governments shape the structure of the IT industry. Beijing is dominated by small hybrid minying enterprises that enjoy substantial government support and that focus well on software development. The Shanghai government tends to foster large state-owned enterprises as the major IT development driver, especially in IT hardware, and pays less attention to minying enterprises. In spite of its rich technology resources, the IT sector in Xi'an lags behind Beijing and Shanghai. The old city has been shackled by its decrepit state-owned sector. In the 1980s the city government's technology development strategy was to take care of this "interest group", but from the 1990s onwards, in order to catch up with other places, the Xi'an government started to support the development of minying enterprises. Guangzhou, which is highly geared to the market, boasts a lot of private enterprises rather than hybrid concerns, but it has not nurtured a strong IT sector due to a lack of local government support. The above case studies highlight three critical points that deserve our attention. First, the market alone is unable to buttress the high-tech sector, because many resources need to be provided by the government, such as R&D, education and funding. The lack of such inputs is the weak point of Guangzhou's IT industry. Second, the existing industrial pattern inevitably limits the selection of a development strategy. …