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Upgrading

Industrial Upgrading refers to the process of improving or advancing a sector's technological, organizational, or product capabilities to enhance its competitiveness, productivity, and overall performance within the economy.

Technological learning denotes the iterative process through which individuals, organizations, or societies acquire, assimilate, and apply knowledge and skills related to technology, fostering innovation, efficiency, and adaptation over time.

Structural Upgrade: "Structural upgrade" denotes the process of enhancing or improving the fundamental framework, systems, or infrastructure of an entity, typically aimed at increasing efficiency, capacity, or resilience.

Government Grants and Direct Subsidies to Promote Firms’ Technological Learning Should be Restricted.

  • Different Incentives—tax concessions, loans, and grants—have inherent advantages and disadvantages. Tax incentives have the benefit of being non-discriminatory: they are open to all firms that meet stated criteria, and administration is relatively simple. On the other hand, grants are generally more effective in promoting activities prioritized by the government, and, unlike tax incentives, they are less likely to subsidize activity that would have occurred in any case (Turpin et al., 2002).
  • Use of Grants in Taiwan
    • Development of Targeted Leading Products (DTLP)
      • The government provided firms with a grant of 50% of total product development expenses to exceed the productivity level of firms in Taiwan.
    • Development of Critical Components and Products (DCCP)
      • It was approved in 1992 to develop crucial components and products with high value-added and development potential that would improve the industrial structure and substantially enhance the competitiveness of downstream industries. 66 components and parts were selected (Lauridsen, 1999).
    • …
  • Use in Singapore:
    • Innovation Voucher Scheme (IVS): Provides SMEs with grants to pay for consultancy and technical services provided by local and reputable overseas universities and research institutes.
    • The government also uses this scheme to promote inter-firm collaboration by allowing up to 10 SMEs to pool their vouchers.
    • I am using the Innovation Scheme to create the habit of uniting forces to compete in foreign markets.
    • On the other hand, in Thailand, grant schemes to promote specific or targeted activities to enhance firms' technological learning were limited due to market distortion and rigid government regulations to stem corruption and cronyism. Therefore, Thailand needs the opportunity to use effective and more targeted policy tools to promote technological catch-ups and has to rely only on tax incentives, a blunt but easier-to-handle instrument.

Referencing

  • Intarakumnerd, Patarapong, Pun-Arj Chairatana, and Preeda Chaiyanajit. "Global production networks and host-site industrial upgrading: the case of the semiconductor industry in Thailand." Asia Pacific Business Review 22.2 (2016)
  • Doner, Richard F., Patarapong Intarakumnerd, and Bryan K. Ritchie. "University–industry linkages in Thailand: Sources of weakness in economic upgrading." Science, Technology and Society 18.2 (2013): 213-229.
  • Rasiah, Rajah, and Yap Xiao Shan. "Institutional support, technological capabilities and domestic linkages in the semiconductor industry in Singapore." Asia Pacific Business Review 22.1 (2016): 180-192.
  • An Exploratory Review of the Relationship Between Enterprise Training and Technology Upgrading: Evidence From South African Manufacturing Firms.
  • Amsden, A. and Hikino, T. (1993) ‘Borrowing Technology or Innovating: An Exploration of the Two Paths to Industrial Development,’ in R. Thomson (ed.), Learning and Technological Change, New York: St. Martin’s Press, pp. 243-266.
  • Lauridsen, L. (1999) “Policies and Institutions of Industrial Deepening and Upgrading in Taiwan III-Technological Upgrading”, International Development Studies Working Paper No.13, Roskilde University, Roskilde, Denmark
  • Intarakumnerd, Patarapong, and Meng-Chun Liu. "Industrial technology upgrading and innovation policies: A comparison of Taiwan and Thailand." Emerging States at Crossroads (2019)
  • Structural Upgrade - Wu, Ning, and ZuanKuo Liu. "Higher education development, technological innovation and industrial structure upgrade." Technological Forecasting and Social Change 162 (2021): 120400.