Multinational Knowledge Strategies, Policy and the Upgrading Process of Regions: Revisiting the Automotive Industry in Ostrava and Shanghai

Abstract

This paper revisits how and why new multinational knowledge-based strategies and multi-level governmental policies influence the upgrading process of regions in developing economies. Automotive multinationals traditionally exploited local asset conditions, but it is shown that they have also been contributing to knowledge-generation systems via investments in R&D centres and cooperation with regional knowledge producers. We discern three elements of the upgrading process of regions—upgrading of domestic firms, subsidiary evolution and establishment of strategic relations with local knowledge institutes—to analyse two case studies: Ostrava (Czech Republic) and Shanghai (China). The cases show that all types of upgrading—product, process, chain and functional—have taken place in the last years, and that follow sourcing may have a positive impact on regional upgrading. These observations provide lessons for governments in developing economies which aim to strengthen innovation-based regional development.

Acknowledgements

This research has been supported financially by the Institute for Housing and Urban Development Studies (IHS). Luis Carvalho also thanks FCT – Portuguese Foundation for Science and Technology (doctoral grant). We are grateful to Alessandro Costa, Eugenia Murialdo and Rachel Feng for their support during the field work in Shanghai. Finally we would like to thank Gert-Jan Hospers and two anonymous reviewers for their comments on earlier versions of this paper. Of course, the responsibility of the contents of this article is of the authors alone.

Notes

Despite various studies dealing with the automotive industry in the Czech Republic as a whole (Pavlinek, 2008; Pavelinek & Ženka, 2010; Rugraff, 2010), the case of Ostrava, to our knowing, has not been dealt in the current literature (or at least within English outlets).

This article is based on a larger comparative study towards the link between manufacturing and more knowledge intensive parts of the value chain including R&D and design (see Van Winden et al., 2010).

This may suggest that upgrading equals innovation (Morrison et al., 2008). However, innovation does not necessary lead to upgrading since competitors may be more innovative and, thus, upgrading needs to be seen as a relative result (Kaplinsky & Readman, 2005).

OEMs still tend to exert power over suppliers due to superior financial resources, their position in global production networks and privileged relations with governments (Rutherford & Holmes, 2008; Isaksen & Kalsaas, 2009).

For instance, research on new fuels in Brazil is a clear example (Van Winden et al., 2010).

There are various other factors affecting the nature of the upgrading process, including the type of chain governance (Humphrey & Schmitz, 2002) and the type of industry (Giuliani et al., 2005).

Note that the number of joint ventures increased rapidly from 55 in 2001 (Depner & Bathelt, 2005) to 70 in 2005 (website SAIC).