Local Dynamics of Industrial Upgrading by Yi Liu

Author:Yi Liu
Language: eng
Format: epub
ISBN: 9789811542978
Publisher: Springer Singapore

Fig. 4.6Importance of supports from governments and institutions.

Note Informants were requested to evaluate the degree of importance of governmental supports during the upgrading of their companies. A value ranged from absent (0) to very high (3) was attributed to each type of supports. The result was averaged. Source Author’s survey on 45 local firms

At the global level, local firms tended to look for more upgrading opportunities by taking advantages of competitive dynamics within GPNs. This strategy was implicitly generalized from different viewpoints by my informants. It enabled local firms to bypass the control of foreign firms and cooperate with a wider range of foreign partners. The disintegration of the FSBF pattern (see Sect. 4.3.2) between Hong Kong and the PRD is a good example.

Within the FSBF pattern, Hong Kong firms’ governance power was vulnerable. Overtime, the PRD’s local firms became familiar with international markets and trading regulations. They went to Hong Kong to establish their own shops and receive orders from global buyers directly. At the same time, when domestic institutional environment became more liberal, global buyers also preferred to bypass Hong Kong traders and to develop their own suppliers in the PRD. This tendency was facilitated by more frequent international trade fairs, business exhibitions, or other events hosted in the PRD (Yeh and Xu 2006). The reunion of Hong Kong and China and the Asian financial crisis also facilitated this process (Jao 2001; Shen 2003). Eventually, the governance power of Hong Kong firms was bypassed. Hong Kong no longer served as the ‘front shop’ of the PRD. It gradually shifted to providing professional sourcing/trading services for global buyers and logistic services for the PRD firms, respectively (Tewari 2006; Yeh and Xu 2006). This change is reflected in the comment by a senior committee member of the Fashion Designer Association of Hong Kong who is also the CEO of Alter Design Corporation:After the reunion, global buyers [lead firms] preferred to cooperate directly with firms from mainland China. Everybody knows that middle man [Hong Kong’s firms] must take some money, so why not we just move further to deal with the producer. I must say, that the crisis [in 1997] gave the PRD an opportunity. Because China’ well performances within the crisis, those buyers had faith to deal with Chinese firms, and they soon found that PRD’s local firms were not bad actually. So things got changed. A lot of [Hong Kong] bosses needed to find another way to make money, like turning to the logistics and financial industries. Hong Kong sill has certain expertise in these kinds of industries. (Interview 100602, on 2 June 2010 in Guangzhou)

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