The role of the state as an inter-scalar mediator in globalizing liquid crystal display industry development in South Korea

ABSTRACT

Deriving insights from the global production network (GPN) framework, we examine the recent development of the liquid crystal display (LCD) industry in South Korea. Using the GPN framework, we focus on the role of the national state as an active inter-scalar mediator in the dynamic strategic coupling process between global leading firms and local actors in globalizing regional development. We argue that the role of the national state as an inter-scalar mediator was crucial in coordinating localized growth factors with globalizing external factors to create and develop the LCD industry. This was achievable because of the legacy of the developmental state and the top-down implementation of policy in South Korea. Using the idea of the inter-scalar mediator, we specify the role of the state as a container of laws and practices and as a constructor of regional innovation systems to globalize regional development in the context of a centripetal society. A multi-strategy approach, which included one month of participatory observation, in-depth interviews and secondary data collection, was adopted in order to enhance the validity and reliability of the data.

KEYWORDS:

• LCD cluster
• global production networks
• strategic coupling
• Asan-Tanjung
• Paju

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Corrigendum

This article was originally published with errors. This version has been corrected. Please see corrigendum (http://dx.doi.org/10.1080/09692290.2014.881628)

Notes

¹However, as Coe, Dicken and Hess (2008) argue, the national state remains a key actor in GPNs.

²We were unable to officially interview the LCD focal firms, but interviewed informally former managers in Samsung and LG-Philips and research fellows at the Samsung Economy Research Institute. In addition, we were able to meet with and listen to managers in the focal firms in formal local meetings in the ethnographic field research process. Through these interviews, we were able to collect information and data on the views of the LCD focal firms.

³Although we adopted a multi-strategy approach to enhance the validity and reliability of the data, our research has some methodological limitations. Since the emergence and development of the LCD industry is a recent phenomenon, the impact cannot be fully assessed by snapshot analysis.

⁴Since the GPN approach highlights extra-local links, not all GPN-related literature used the term, cluster, and, in some cases, this term is even deliberately avoided.

⁵Despite the importance of the concept of strategic coupling in their account of regional development, they ‘acknowledge the term is imperfect and may be perceived as a rather crude structural interpretation of regional development’ in their notes (Coe et al., 2004: 482). The current paper will as such provide a redefinition in a subsequent section.

⁶They highlight three sets of conditions for regional development: first, ‘the existence of economies of scale and scope within specific regions’; second, ‘the possibility of localization economies within global production networks’; and last, ‘the appropriate configurations of “regional” institutions to “hold down” global production networks and unleash regional potential’ (Coe et al., 2004: 470).

⁷The East Asian developmental states have more independent, or autonomous, political power as well as more control over the economy. They are characterized by strong state intervention as well as extensive regulation and planning. However, there is a typological difference between the developmental bureaucratic state (DBS) in Japan and South Korea and the developmental network state (DNS) in Taiwan. The former is characterized by industrial policy, that is, the deliberate choice to develop certain strategic industries (Johnson, 1982) as well as to govern the market (Wade, 1990), while the latter plays a role as a catalyst in helping firms develop product and process innovations so as to promote economic development (O Riain, 2004; Block, 2008).

⁸This term, strategic coupling, is deeply influenced by Jessop's work (1990) and Tickell and Peck's study (1992). These use the concept of ‘structural coupling’ to explain the co-evolution of autonomous structures. In that sense, ‘the development of one structure affects the evolution of the other, but it neither controls it in a hierarchical relation of command nor subordinates it through a functionalist logic which requires one system to act for and on behalf of the other system’ (Jessop, 1990: 359). They, therefore, focus primarily on the structural aspect of the coupling process of two or more systems and structures (i.e., structural coupling between accumulation and regulation), while we focus on the strategic aspect of the coupling process among/between actors in the multi-scalar setting.

⁹The developmental state provided cheap credit and other subsidies and incentives to firms if they met the performance criteria that the state imposed on the recipient firms (Amsden, 1989). In this paper, we do not attempt to elaborate the typological difference of developmental states between the DBS and the DNS and the evolution of both. To attempt this, we would need to scrutinize the evolutionary relations between the state and firms as well as inter-firm dynamics, an attempt that is beyond the scope of this paper. We, thus, leave a certain scope for future investigation into the evolution of both the DBS and the DNS. Broadly, it can be suggested that both the DBS and the DNS evolve over time, and the DBS may shift toward the DNS.

¹⁰After experiencing the Asian financial crisis since 1997, there have been on-going debates on the characteristics of the South Korean state. Chang (1998) and Chang, Park and Yoo (1998) argued that the traditional mechanism of the industrial policy and financial regulation were dismantled after the Asian financial crisis. Pirie (2005, 2007) argued for the new Korean state as a neoliberal state. Yet, Wong (2004) and Jo, Jung and Lee (2007) argued for the democratic developmental state. Evans (2010) and Chang (2010) normatively urged the need for the democratic development state.

¹¹There were just 66 firms in 1999 and 126 firms in 2007 (Interview with a staff member at the Asan Display Firms Association on 19 October 2009).

¹²SE's main LCD plants are now in the Crystal Valley, but its earlier main LCD plants, which produced small-sized panels for mobile instruments, were located in Giheung in Gyeonggi province (Table 3).

¹³Interview with staff members of Asan City Government on 5 February 2009.

¹⁴Asia Business Daily, 18 October 2010. Asan stands high as a new industrial center. Retrieved from http://view.asiae.co.kr/news/view.htm?idxno=2010101807330187147&nvr=Y

¹⁵Etnews, 2 February 2012. Samsung and LG occupied 58.3% of the world LCD market. Retrieved from http://www.etnews.com/news/device/device/2554081_1479.html

¹⁶Asia Business Daily, 18 October 2010. Asan stands high as a new industrial center. Retrieved from http://view.asiae.co.kr/news/view.htm?idxno=2010101807330187147&nvr=Y

¹⁷Gyeonggi provincial government website, www.gg.go.kr (accessed 2 April 2012).

¹⁸Gyeonggi Provincial Government. 2010. An Estimation of the Gross Regional Domestic Products of Cities and Counties in Gyeonggi Province. Retrieved from http://stat.gg.go.kr/publication/publication01_01.jsp?pub_sosok=005&htxt_code=12536969080002842417291754407235 (accessed on 2 April 2012).

¹⁹Interview with a former manager in both Samsung and LG on 22 January 2010 and with two research fellows at the Samsung Economic Research Institute on 12 January 2009.

²⁰Interview with an MOKE official on 26 May 2008.

²¹Interview with two officials in both MOFE and MOKE on 26 May 2008.

²²Interview with a former MOFE official on 25 July 2008.

²³Interview with a research fellow in the Gyeonggi Development Institute on 25 July 2008.

²⁴Interview with an MOFE official on 26 May 2008.

²⁵Interview with an official in the Paju local government on 24 September 2008.

²⁶Interview with a former MOFE official on 25 July 2008.

²⁷Interview with two research fellows in the Chungnam Techno Park Display Center on 5 February 2009.

²⁸The MOCIE, now known as the MOKE, pursued a regional R&D project in order to construct a regional innovation system from the mid-2000s. In 2005, the Regional Research & Development Centre Business Leaders’ Council was established. As of 2010, nine regional R&D centres have been established in nine regions, excluding the SMR.

²⁹Interview with a director in the Display R&D Center on 5 February 2009.

³⁰Interview with a director and a research professor in the Display R&D Center on 19 October 2009.

³¹That is, newcomers without huge government support would face considerable difficulty in entering the industry and competing with incumbents because the industry requires large-scale investments for the economy, given the scale of production (Lee, Lim and Song, 2005). A firm's success in the display industry also requires aggressive and fast investments for next-generation panels, and newcomers are thus disadvantaged. In addition, they would be unlikely to survive in the global market without government support as the display industry experiences cyclical fluctuations.

³²The MOKE and the Korea Display Industry Association held a meeting to pursue policy that could promote the cross-purchase of panels between Samsung and LG in May 2007. According to this policy, Samsung and LG had to agree to the cross–purchase of panels. More specifically, the TV sector of Samsung Electronics would buy 37-inch modules from LG Display, while LG Electronics would buy 52-inch modules from Samsung's LCD sector. This policy, which showed direct government intervention even in purchase, however, fizzled out due to a change of government from the Roh to the Lee government in the late 2000s.

Additional information

Funding

The research upon which this paper is based was supported by Korea University.