Growth without Catching Up

In this paper we attempt to enrich the literature on the diversity of the East Asian experience by focusing on one critical difference between Hong Kong and the other East Asian Newly Industrialized Economies (NIEs) - its distinctive path, since the 1980s, of industrial restructuring by relocation rather than upgrading. By mapping the trajectory of restructuring in the electronics industry, in the first section of this paper, we are going to use it as a critical case to illustrate the general pattern of restructuring in the manufacturing industry as a whole. To further unravel this paradox of growth without upgrading, in subsequent sections of this paper we take a fresh look at the development of the electronics industry from historical and organizational perspectives. We will argue that, in addition to the opportunities and constraints inherent in export-oriented original equipment manufacturing (OEM), environmental imprinting on the internal organizational dynamics of the firms in the industry has also had an effect. Our contention is that because of the dominance of the "sub-contractor model" in the development of Hong Kong industry, local electronics firms have developed a heavy commercial orientation in their organization, and lack a drive towards product innovation. Furthermore, the organizational models acquired during the formative period of the firms has continued to shape their development during the later periods. Analyzing the origins of firms clearly illustrates the "imprinting" effect of the organizational environment on internal organization. We will also discuss briefly the role of the broader institutional context in sustaining the sub-contractor model at the expense of alternative paths of restructuring. In the last section, the experience of the electronics industry's restructuring will be revisited from this organizational perspective to highlight the significance of organizational dynamics in shaping Hong Kong's unique path of industrial development.