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Abstract
The extent to which foreign direct investment (FDI) can foster the long-term economic development of lagging regions remains a highly debated issue in the literature, even in the current era of intense territorial competition for mobile investment and resources. The emergence of new industrial spaces in China that have flourished through FDI offers a good opportunity to revisit the topic. Kunshan in Suzhou, China has evolved from an impoverished area into a world-class information technology (IT) centre within 25 years. FDI, mainly from Taiwan, has enabled Kunshan to gradually upgrade its economy, following a development path that has been largely based on the transplant of entire production chains from Taiwan. Local innovative strategies for attracting and increasing the embeddedness of Taiwanese FDI are also an important element of Kunshan's success. This paper discusses the positive aspects, as well as the potential costs and negative facets, of FDI in Kunshan, with the view to draw some policy lessons regarding the impact of FDI on the economic development of lagging regions.
Acknowledgements
The authors would like to thank the National Science Council of Taiwan for financially supporting this research (NSC 96-2415-H-424-004-MY3). Ching-mu Chen would also like to thank the National Science Council of Taiwan for the grant of the Graduate Students Study Abroad Program (NSC 96-2917-I-002-107). An earlier version of this paper was presented at the 48th Congress of the European Regional Science Association (ERSA) that took place during 27–31 August 2008 in Liverpool, UK. Many thanks to the participants of the Congress and the two anonymous referees for their comments on the previous versions of this paper. The usual disclaimers apply.
Notes
See also Hardy Citation(1998) for a concise summary and an interesting application of the typology for the Wroclaw region of Poland.
For a detailed discussion of these policy initiatives see Walcott Citation(2003).