International competitiveness, technical change and the state: The machine tool industry in Taiwan and Japan

Abstract It is widely accepted that the growth performance of Japan and the Asian newly industrialized countries (Hong Kong, Singapore, South Korea and Taiwan) is partly the result of the international competitiveness they have achieved in a number of export industries. It remains, however, to explain how this competitiveness was achieved. In the first part of the paper an attempt at such an explanation, based on the theory of comparative advantage, is critically examined. It is argued that while this explanation does have some explanatory power, it does not deal adequately with (a) the role of technical and productivity change; (b) the causal mechanisms underlying economic growth; and (c) the role of the state. The rest of the paper examines the case of machine tools in Taiwan and Japan showing the importance of these three factors as well as a number of others as determinants of international competitiveness. The paper ends with a discussion of policy dilemmas relating to international competitiveness in the Taiwanese machine toot industry.

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