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From trade hub to innovation hub
The role of Hong Kong's innovation system in linking China to global markets
Erik Baark
Associate Professor, Division of Social Science, Hong Kong University of Science and Technology, Hong Kong
Naubahar Sharif
Research Assistant Professor, Division of Social Science, Hong Kong University of Science and Technology, Hong Kong
Abstract
Hong Kong has achieved a remarkable rate of economic growth in the last half of the twentieth century, and is widely acknowledged as an important driver of development in South China. The territory occupies a unique position as an international trade and financial hub on the Chinese border, in which capacity it has been well served by the entrepreneurial drive and resilience of its population.
Extensive exploitation of technology and innovation in the organization of international production networks have fueled Hong Kong's economic success-but the risks associated with these features of the innovation system also threaten to undermine the territory's future growth.
This paper discusses the nature of the global and regional linkages characterizing Hong Kong's innovation system-particularly its integration with a rapidly developing innovation system in China-and its move towards an innovation hub status.
Keywords
Hong Kong, China, Pearl River Delta, innovation hub, innovation system
Article Text
Hong Kong has lately resumed its traditional position as the key transit point for the exchange of goods and services between China and the international economy. Sophisticated and reliable intermediary services occupy a key role in maintaining this status, but Hong Kong's future depends on the capacity of its intermediaries to retain and expand market share both within Asia and worldwide (Meyer 2000: 247).
Hitherto, however, the question of technological innovation in Hong Kong's developmental experience has gone largely ignored. The few studies that have addressed the issue have emphasized the laissez faire policies that have characterized the industrialization process in Hong Kong (eg Hobday 1995). To be sure, Hong Kong's entrepreneurs have adroitly exploited available technology, but they have not generally carried out research and development (R&D) for the purposes of creating proprietary technology (Davies 1999; Yu & Robertson 2000). For this reason, technological innovation has only recently attracted serious attention in Hong Kong, where the government has launched a new strategy in pursuit of knowledge-intensive economic growth. R&D investment in industry has been gradually rising, however, and continuing public support of efforts to generate new technologies are transforming Hong Kong into an innovation hub with global links to and from China.
Our point of departure in this paper is the proposition that a system of innovation has been emerging in Hong Kong during the past century, conditioned by major economic and political upheavals at the global level as well as by gradual institutional change at the local level. The maturation of the system of innovation has accelerated lately, as the influence of economic and political forces have re-asserted themselves through the return of Hong Kong to Chinese sovereignty and the Asian financial crisis of the late 1990s.
It must be acknowledged that Hong Kong's constantly shifting position in the global and regional political and economic landscape has been - and continues to be - a fundamental influence on its innovation system. Many critical factors are situated in political environments that reach beyond the local (or 'national') scale. For example, the influence of global networks has often directly affected regional economies, underscoring the need for local and regional development. Although Hong Kong's government has enjoyed relative autonomy through British colonial rule and now the return to Chinese sovereignty - with a level of authority similar to that of a national government - the international context and indeed the ideology of the government itself (which has generally espoused a laissez-faire economic policy) have left the regulation of business in Hong Kong largely to market forces. Consequently progress in the development of Hong Kong's innovation system converges at three distinct spatial levels: local, regional, and global. In other words, what we observe in our analysis of the innovation system reflects causal relationships that transcend 'national' dimensions. Indeed, linkages with economic or innovative activities that occur outside the borders of the Hong Kong Special Administrative Region (HKSAR) - which have enjoyed increasing public policy support - have transformed the competitive strategies of business firms in the territory.
In the remainder of this paper, we introduce the concept of an innovation hub and discuss how an innovation hub might develop on the foundation of a trade and financial hub; review the historical background from which current developments have emerged; examine the integration of Hong Kong's economy with that of the Pearl River Delta Region; and assess Hong Kong's prospects for finally emerging as a key innovation hub in China. In this respect we sketch both optimistic and pessimistic scenarios in the concluding section.
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