The Analysis of Technological Intra-Industrial Trade Competition and Trade Specialization

By Wang, Teng Kun | Journal of Global Business Issues, Spring 2008 | Go to article overview

The Analysis of Technological Intra-Industrial Trade Competition and Trade Specialization


Wang, Teng Kun, Journal of Global Business Issues


ABSTRACT

This study analyzed the international technological competition in Information Communication Industry (ICI) to explore the phenomena of intra-industrial trade effects. Owing to the high growth rate in ICI industry, but with no guarantee of increasing profit from greater competition, it is important to improve its advantage terms from international competition. Trade Specialization Coefficients (TSC) were calculated to realize the current situation of technological trade competition. Based on the discussion of Product Life Cycle (PLC) and Technology Life Cycle (TLC), the comparative advantage of ICI in Taiwan is decreasing, but it still enjoys export specialization. The empirical findings have shown that Taiwan lost the advantage of intra-industrial technological trade competition. Then, the Ownership-Location- Internalization (OLI) advantage theory is applied to illustrate the high-tech companies' management. Finally, some suggestions are provided for ICI in Taiwan to get more pragmatic consideration.

(ProQuest: ... denotes formulae omitted.)

l. Introduction

With the rapid development of high technology, most of the products in the Information Communication Industry (ICI) have entered into different stages of the product life cycle (PLC). Owing to the higher market demand for technological products in the developed countries, the multinational enterprises (MNEs) will choose foreign direct investment (FDI) to maintain or increase their market share. The information communication industries were welldeveloped in the new industrial countries (NICs), especially in the Asian- Pacific areas. It is the reason that this study will go further to discuss the phenomena of intra-industrial technological trade competition by using the Trade Specialization Coefficients to analyze the difference among them.

When high technology companies evaluated the terms of investment environment, most of them supported the government well organized policies, such as Asia-Pacific Regional Operations Centre Plan (APROC) in Taiwan (Kuo, 2002) to promote international trade and market openness. To integrate the industries of transportation, finance, telecommunication, manufacture, etc., and the degree of freedom for labour, capital, technology, the government decided to expand international markets and its industrial development, and to create a good investment environment to upgrade the competitive advantage by industries.

In accordance with the above discussion, this paper analyses the current technological trade competition in ICI, and generalizes the empirical outcomes to describe how the developed countries can maintain their industrial advantages. Lin's (2003) "Trade Specialization Coefficient (TSC)" is adopted to analyse the international competition in the ICI. Moreover, the product life cycle (PLC) and technology life cycle (TLC) will be combined to study the competition trend. Finally, John Dunning's (1996) "Ownership-Location-Internalization (OLI) Advantage Theory" is included for providing some useful suggestions for ICI enterprises in Taiwan.

2. Literature Review

Based on the development of technology, the Information Communication Industry has evolved from the tech-receiving country to the tech-transferring one under the PLC model; moreover, it would accumulate much FDI experience and capital stock during that period. As a result, MNEs will perform under the principle of comparative advantage and the theory of international industry division of labour in order to practice their FDI strategies (Caves, 2000). The development of FDI for MNEs generally increases the market share for the parent companies and its subsidiaries; furthermore, it also reduces the trade conflict between the home and host countries. To consider the maximization of national welfare, the home country has to adopt the international industry division of labour to elevate the effects of horizontal and vertical division of labour under the consideration of intraindustrial competition (Dussauge and Garrette, 2001)

2. …

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