The Political Economy of Automotive Industrialization in East Asia

Abstract

This book offers a political economy explanation for the striking cross-national differences in strategies and performance among East Asia’s automotive industries. Some countries—China, South Korea, and Taiwan—have successfully pursued “intensive” growth strategies by increasing local value added based on domestic inputs and technological competencies. Malaysia has attempted but failed to pursue this path. In contrast, Thailand has become a champion of “extensive” growth, relying on foreign assemblers and their suppliers to achieve an impressive expansion of production, assembly, and exports. Latecomer Indonesia has followed Thailand with some success, whereas the Philippines has remained an automotive backwater. Through cross-case and within-case analyses of the seven countries, the book argues that variation is a function of the institutional and political contexts in which firms operate. Different strategies require different institutions and institutional capacities. Intensive development is especially institutionally demanding. Effective institutions emerge when political leaders face severe claims on resources (security threats and domestic pressures for welfare improvement) in the absence of easily accessible revenues to satisfy such needs. Brief comparisons with Brazil, Mexico, and other developing countries confirm the utility of the analytic framework. This explanation is superior to neoclassical accounts. It is consistent with but provides more insight than other prominent approaches to development: national innovation systems, global value chains, and developmental states. New challenges facing auto assemblers and suppliers, such as the transition to electric and autonomous vehicles, will call heavily upon the institutional capacities highlighted in this book.