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Responses to the Crisis Constraints to a Rapid Trade Adjustment in East Asia�s Electronics Industry

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  • Dieter Ernst

Abstract

It has been argued that “… trade adjustment in East Asia…will be rapid and sizable, lifting aggregate growth in these economies even as the domestic non-tradable sectors continue to suffer a decline (as in Mexico)” (World Bank, 1998, p.5). Much hope has been pinned on the electronics industry to come through with rapid growth through expanding exports. Two arguments appear to bolster such an expectation: the severity of the region´s currency depreciations has lowered the cost of much of its electronics supply base relative to its competitors; and the electronics industry´s proven track record as an engine of export-led growth shows that it can be quickly started and accelerated in response to changes in the market. However, no export boom in electronics has (as yet) materialized. The paper analyzes what explains this puzzle. We first introduce a taxonomy of East Asia´s electronics firms and market segments to distinguish different capacities to ride out the crisis. We then discuss three barriers to an East Asian export boom in electronics: i) supply-side constraints that result from limited access to trade finance, and from the cost-increasing impact of local currency depreciations in highly import-dependent countries; ii) demand-related constraints, resulting from deteriorating growth perspectives in East Asia´s electronics export markets; and iii) deflationary pricing pressures, resulting from a narrow specialization in high-tech commodities that are characterized by periodic surplus capacity and price wars. Combined, these barriers have produced a vicious circle: once exports increase, net volume gains are likely to be offset by pricing losses.

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File URL: http://www3.druid.dk/wp/19990002.pdf
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Bibliographic Info

Paper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 99-2.

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Date of creation: 1999
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Handle: RePEc:aal:abbswp:99-2

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Web page: http://www.druid.dk/

Related research

Keywords: Crisis; industrial dynamics; specialization; deflation; Asia; electronics industry;

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References

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  1. Keld Laursen & Ina Drejer, 1997. "Do Inter-sectoral Linkages Matter for International Export Specialisation?," DRUID Working Papers 97-15, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
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  3. Nicolai J. Foss, 1997. "The Resource-Based Perspective An Assessment and Diagnosis of Problems," DRUID Working Papers 97-1, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  4. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  5. Dieter Ernst & Bengt-Åke Lundvall, 1997. "Information Technology in The Learning Economy -Challenges for Developing Countries," DRUID Working Papers 97-12, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  6. Richard N. Langlois & Nicolai J. Foss, 1997. "Capabilities and Governance the Rebirth of Production in the Theory of Economic Organization," DRUID Working Papers 97-2, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  7. Dieter Ernst, 1998. "Catching-Up, Crisis and Industrial Upgrading. Evolutionary Aspects of Technological Learning in Korea's Electronics Industry," DRUID Working Papers 98-16, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  8. Bengt-Åke Lundvall, 1996. "The Social Dimension of the Learning Economy," DRUID Working Papers 96-1, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
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  10. Peter Maskell, 1996. "Localised Low-tech Learning in the Furniture Industry," DRUID Working Papers 96-11, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  11. Nicolai J. Foss, 1998. "Austrian Economics and Game Theory a Preliminary Methodological Stocktaking," DRUID Working Papers 98-28, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  12. Nicolai J. Foss, 1996. "Firms, Incomplete Contracts and Organizational Learning," DRUID Working Papers 96-2, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  13. Nicolai J. Foss, 1996. "Capabilities and the Theory of the Firm," Revue d'Économie Industrielle, Programme National Persée, vol. 77(1), pages 7-28.
  14. Marco Valente, 1998. "Technological Competition a Qualitative Product Life Cycle," DRUID Working Papers 98-6, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  15. Nicolai J. Foss & Jens Frøslev Christensen, 1996. "A Process Approach to Corporate Coherence," DRUID Working Papers 96-7, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  16. Bent Dalum & Keld Laursen & Gert Villumsen, 1996. "The Long Term Development of OECD Export Specialisation Patterns: De-specialisation and "Stickiness"," DRUID Working Papers 96-14, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  17. Kirsten Foss & Nicolai J. Foss, 1998. "The Market Process and The Firm Toward a Dynamic Property Rights Perspective," DRUID Working Papers 98-14, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  18. Nicolai J. Foss, 1996. "Thorstein B. Veblen Precursor of the Competence-Based Approach to the Firm," DRUID Working Papers 96-15, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  19. Dieter Ernst, 1997. "High-Tech Competition Puzzles. How Globalization Affects Firm Behavior and Market Structure in the Electronics Industry," DRUID Working Papers 97-9, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  20. Bengt-Åke Lundvall & Frank Skov Kristensen, 1997. "Organisational Change, Innovation and Human Resource Development as a Response to Increased Competition," DRUID Working Papers 97-16, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  21. Alice Lam, 1998. "Tacit Knowledge, Organisational Learning and Innovation A Societal Perspective," DRUID Working Papers 98-22, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  22. Esben Sloth Andersen & Anne K. Jensen & Lars Madsen & Martin Jørgensen, 1996. "The Nelson and Winter Models RevisitedPrototypes for Computer-Based Reconstruction of Schumpeterian Competition," DRUID Working Papers 96-5, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  23. Nicolai J. Foss, 1998. "Firms and the Coordination of KnowledgeSome Austrian Insights," DRUID Working Papers 98-19, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  24. Nicolai J. Foss & Volker Mahnke, 1998. "Strategy Research and the Market Process Perspective," DRUID Working Papers 98-29, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  25. Esben Sloth Andersen, 1996. "The Evolution of an Industrial Sector with a Varying Degree of Roundaboutness of Production," DRUID Working Papers 96-13, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
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  27. Ina Drejer & Frank Skov Kristensen & Keld Laursen, 1997. "Studies of Clusters as a Basis for Industrial and Technology Policy in the Danish Economy," DRUID Working Papers 97-14, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
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