Geopolitical Factors in International Competitiveness

1. Casic 2011 Geopolitical Factors in International Competitiveness Jeffrey A. Hart Indiana University April 1, 2011

2. Contact information <ul><li>Department of Political Science </li></ul><ul><li>Woodburn Hall 210 </li></ul><ul><li>Bloomington, IN 47405 </li></ul><ul><li>Email: [email_address] </li></ul><ul><li>Web: http://mypage.iu.edu/~hartj </li></ul> Contact information <ul><li>Department of Political Science </li></ul><ul><li>Woodburn Hall 210 </li></ul><ul><li>Bloomington, IN 47405 </li></ul><ul><li>Email: [email_address] </li></ul><ul><li>Web: http://mypage.iu.edu/~hartj </li></ul>

3. My books on this topic: <ul><li>Rival Capitalists (1992) </li></ul><ul><li>Globalization and Governance (1999) </li></ul><ul><li>Managing New Industry Creation (2002) </li></ul><ul><li>Technology, Television, and Competition (2004) </li></ul><ul><li>Competing for Knowledge (in preparation) </li></ul> My books on this topic: <ul><li>Rival Capitalists (1992) </li></ul><ul><li>Globalization and Governance (1999) </li></ul><ul><li>Managing New Industry Creation (2002) </li></ul><ul><li>Technology, Television, and Competition (2004) </li></ul><ul><li>Competing for Knowledge (in preparation) </li></ul>

4. What are Geopolitical Factors? <ul><li>Governmental policies adopted primarily as a response to inter-country and inter-regional rivalries </li></ul><ul><li>They take three primary forms: </li></ul><ul><ul><li>Industrial policies </li></ul></ul><ul><ul><li>Macroeconomic policies motivated by rivalries </li></ul></ul><ul><ul><li>National security policies that have economic consequences </li></ul></ul> What are Geopolitical Factors? <ul><li>Governmental policies adopted primarily as a response to inter-country and inter-regional rivalries </li></ul><ul><li>They take three primary forms: </li></ul><ul><ul><li>Industrial policies </li></ul></ul><ul><ul><li>Macroeconomic policies motivated by rivalries </li></ul></ul><ul><ul><li>National security policies that have economic consequences </li></ul></ul>

5. The Example of Digital TV <ul><li>Competition among three regions (North America, Western Europe, and Japan) resulted in the adoption of 3 incompatible DTV standards: </li></ul><ul><ul><li>ATSC (N. America) </li></ul></ul><ul><ul><li>DVB (W. Europe) </li></ul></ul><ul><ul><li>ISDB (Japan) </li></ul></ul> The Example of Digital TV <ul><li>Competition among three regions (North America, Western Europe, and Japan) resulted in the adoption of 3 incompatible DTV standards: </li></ul><ul><ul><li>ATSC (N. America) </li></ul></ul><ul><ul><li>DVB (W. Europe) </li></ul></ul><ul><ul><li>ISDB (Japan) </li></ul></ul>

6. Global DTV Standards Wars

7. The Example of Flat Panel Displays <ul><li>Japanese dominance of the industry challenged in the 1990s by Korea and Taiwan </li></ul><ul><li>More recent entry of China into the market </li></ul> The Example of Flat Panel Displays <ul><li>Japanese dominance of the industry challenged in the 1990s by Korea and Taiwan </li></ul><ul><li>More recent entry of China into the market </li></ul>

8. Tianma LCD Factory in Shanghai (formerly SVA-NEC) Tianma LCD Factory in Shanghai (formerly SVA-NEC)

9. Theoretical approaches: <ul><li>Neoclassical (industrial policy is bad and counterproductive) </li></ul><ul><li>Regulatory State (regulation necessary for markets to work properly, but industrial policy is still bad) </li></ul><ul><li>Developmental State (industrial policy is useful for catching up) </li></ul><ul><li>Competition State (industrial policy has to take globalization into account) </li></ul> Theoretical approaches: <ul><li>Neoclassical (industrial policy is bad and counterproductive) </li></ul><ul><li>Regulatory State (regulation necessary for markets to work properly, but industrial policy is still bad) </li></ul><ul><li>Developmental State (industrial policy is useful for catching up) </li></ul><ul><li>Competition State (industrial policy has to take globalization into account) </li></ul>

10. . The Developmental State vs. the Regulatory State Developmental Regulatory Type of Bureaucracy Elite, Insulated Transparent, Accountable Support for New Industries Extensive Limited Use of State-Controlled Banks Extensive Limited Stance w/regard to Private Firms Tutellary Regulatory

11. . Industrial Policies <ul><li>Includes a wide variety of policy instruments that are intended to advance the international competitiveness of “national champion” firms, such as: </li></ul><ul><ul><li>Investment subsidies </li></ul></ul><ul><ul><li>Public R&D expenditures </li></ul></ul><ul><ul><li>Science parks and free trade zones </li></ul></ul><ul><ul><li>Export incentives </li></ul></ul>

12. . The Impact of Globalization on National Economic Strategies <ul><li>Greater volatility in global financial markets requires changes in financial market regulations in all countries </li></ul><ul><li>To remain internationally competitive, firms have adopted global production strategies </li></ul><ul><li>Even regulatory states have to compete for inflows of foreign direct investment </li></ul><ul><li>Developmental states cannot succeed with pure national champion strategies </li></ul>

13. . Example of GM in China <ul><li>2010 sales of 2.3 million vehicles in China </li></ul><ul><li>World-class production facilities (joint venture with SAIC) </li></ul><ul><li>Modified Buick as a chauffeur-driven luxury car </li></ul><ul><li>Not competing with low-end national champions like Geely </li></ul>

14. . Example of LG LCD Production <ul><li>Joint venture with Philips </li></ul><ul><li>Only major competitors globally are Samsung and Sharp </li></ul><ul><li>Production facilities use best materials and tools from global suppliers (e.g. Corning and Canon) </li></ul><ul><li>Have to worry about China </li></ul>

15. . A New Theory about Economic Rivalry in Globalized Industries Gap between global production and consumption shares in country A Gap between global production and consumption shares in country B Level of Economic Rivalry between A and B