There are various factors that led to economic success in Japan as well as other countries that were part of the Asian Miracle during the 1950 to 1990. These factors contrast and vary in various ways. While Japan played catch up to other developed economies like the US, the other Asian countries obtained technological support, marketing network and management skills from Japan. Foreign direct investments were set in these countries as the cost of production in Japan rose drastically. The Flying Geese model explains how success of Japan led to general growth of the regional economy.
The wild-geese-flying model (FG Model) of industrial development illustrates development whereby the less-developed country’s economy gets into an economic relationship with other advanced countries. This FG model targets at explaining the process of catching-up of industrialization in the development of open economies. Within the region of Pacific the Pacific, for instance, the US developed first as a lead country (Kojima, 2000). In the course of the late 19th century Japan commenced to play catch-up development within the durable consumer goods, nondurable consumer goods, as well as capital goods sectors. There are patterns that FG model follows. In Japan case, the structural transition of building new major industries was first undertaken followed by industry rationalization. The two processes make up one development stage that took about twenty to twenty-five years. Alternate promotion of rationalization and diversification resulted into a reinforcing impact in rapid production as well as trade expansion (Kojima, 2000). The development stages sequencing happened naturally since it was directed by the growing demand in either foreign or home markets, aided by the quick amassing of capital owing to a saving ratio that was high, and triggered by technological progress that was effective. Contrary to the relative stability of aggregate prices, movements of asset prices in Japan have been unique. Nikkei 225 stock average for Japan rose from six thousand in 1980 to peak at almost forty thousand in the sunset of 1989. In the third quarter of 1990 Nikkei average lost close to fifty percent of its value (Hoshi & Kashyap, 2004). The stock prices persisted to stagnate in the large part of 1990s.
Akamatsu added another third model of intercountry alignment for the purpose of explaining the international/regional transfer of FG development emanating from the lead goose to follower geese (Thangavelu, Yong & Aekapol, 2009). Korea and Taiwan have been historically receptacles for the declining Japanese industries. Asian New Industrialized Countries as well as ASEAN countries followed in the footsteps Japan. Observers credit the growth of the New Industrialized Countries (NICs) of East Asia as well as other ASEAN countries to Japan. However the flying model is deficient and there is diversity within the development path of the NICs (Hobday, 1995). The model does not recognize any impulses that came up in the development of the region. These comprise of the indigenous efforts made by the four tigers (Hong Kong, South Korea, Singapore, and Taiwan) to accumulate technology together with exporting overseas. The four tigers are credit as a significant source of competiveness of East Asia trade as well as regional investment. The flying geese model gives credence to Japan as a main driving force for economic development. Japan as a country developed first attaining a strong technological foundation. When the wage costs went up at home, production facilities in Japan were consequently relocated into the four tigers as well as other economies which are low-cost (Hoshi & Kashyap, 2004). The four tigers attribute their export success hugely to Japanese subsidiaries situated and operating from within their economies as well as joint ventures with firms from Japan. Therefore, the economic development of the region was through aid, trade and Foreign Direct Investment.
Newly Industrialized Countries imported machines, parts, materials and management styles from Japan. The economy of Taiwan is made up of numerous small family-owned businesses. These firms are usually characterized by autocratic management, overseas family connections and quick response to dynamic market niches. Companies that are successful have fairly grown but still lags behind as than Japanese Keiretsu (Kojima, 2000). Styles of management in Taiwan owe a lot from American firms as well as Japanese firms. Many of the top managers in Taiwan worked overseas in US high-technology firms as well as attended universities in the US. Taiwanese companies still have strong technological connections with US firms in the Silicon Valley and other places (Liang, 2010). In the course of 1980s two of the major exports from Asia-Pacific were automobiles and electronics. Among the four tigers, South Korea took the first position in gaining from exports of automobiles. Other tigers exported huge amounts of electronics products such as disk drives, personal computers, colour TVs, semiconductors, and video cassette recorders (Hobday, 1995). The tigers have demonstrated significant competitive as well as technological ability in at least in areas of the advanced electronics. Electronics make up the most percentage of export items for Taiwan, Singapore and South Korea (Thangavelu, Yong & Aekapol, 2009). All those countries have advanced step-by-step from tasks that are labour-intensive like testing as well as assembly to production, product development and design, and precision engineering to research and development.
Singapore is the leading manufacturer of hard disk drivers in the world as well as major exporter and producer of complex consumer and professional electronics. Most of the country’s electronic output is produced under the license for companies from Japan. Leading firms in South Korea like Samsung boast of world-class technological ability in semiconductor memory design as well as fabrications; colour TVs, compact disk players, and camcorders. Within Taiwan, electronics claimed about 18-20 percent of total exports in the course of the 1980s (Hobday, 1995). Studies show that exports from East Asia were by local firms as opposed to multinationals from other nationalities. Some other researches indicate that many South-East Asian nations depended most of the time on multinational corporations in maintaining their competitiveness as well as economic growth within the world economy. Foreign Direct Investment results into injection of capital, advanced new technologies, management skills and marketing techniques in the domestic economy. This raises the economy’s competitiveness as well as output growth (Kojima, 2000). The multinational corporations’ production activities have a pivotal impact on the operation structure of domestic industries by diffusion of new technologies and ideas, greater competition, transfer of significant marketing networks and managerial skills and trigger numerous productive spillovers in the industries domestically.
FDI brings about positive externalities through escalating the level of productivity of domestic firms. This comes about through the transfer of technology and skills from MNCs to locally-owned firms (Liang, 2010). Local firms can hence gain from technology transfers through forward together with backward linkages to the MNCs as well as the improvement in their productivity contributes to economic growth. In the course of the 1980s the NICs persistently imported machinery, technology and other components from Japan, while they exported finished goods to the United States and Europe. Consequently, the foreign trade balances of the four countries have for most years been positive but not very big (Hobday, 1995). According to the flying geese model Japan is clearly a significant source of goods as well as technology for the tigers. The relative importance of factors that made possible the ‘Asian Miracle’ is datable. The flying geese model is very useful and informative. It focuses attention on the significance of Japan in the region. Japan stands tall above the four tigers with regard to economic development and GNP size. Japan has remained ahead of Europe and US in many areas such as semiconductor memories, automobiles and consumer electronic goods (Thangavelu, Yong & Aekapol, 2009). Japan is a role model for other modern Asian economies. Japan helps the regions with joint ventures, FDI, aid and via transfer of modern management practices.
Despite its weakness, the FG model gives a plausible explanation for the source of economic growth of Japan as well as NICs and other ASEAN countries. Whereas other countries like Taiwan have a strong to firms in the US Silicon Valley, transfer of technology and management style from Japan played a role in development of the production industries in these countries. Foreign direct investments in ASEAN countries and NICs played a big role in transfer of technology and management skills hence success of the economies.
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Kojima, K. (2000). The ‘flying geese’ model of Asian economic development: origin, theoretical extensions and regional policy implications, Journal of Asian Economics 11: 375-401.
Liang, M. Y. (2010). Confucianism and the East Asian miracle. American Economic Journal: Macroeconomics, 2(3), 206-234.
Thangavelu, S.M., Yong, Y.W. & Aekapol, C. FDI. (2009).Growth and the Asian Financial Crisis: The Experience of Selected Asian Countries, The World Economy.