Research Methodology

The purpose of this section is to outline the research methodology employed in this study. The main challenge faced by the researcher is to link the empirical investigation of the cross-border networks of governance among Guangdong, Taiwan and Japan to the emerging theoretical understanding of the role of SNGs and private actors in cross-border economic relations, especially the growth of production networks.

Inevitably, the choice of research methodology is guided by a range of factors, including the researcher’s own previous experience, academic background, specialisation and capabilities; the nature, scope and complexity o f the phenomena under investigation, the specific research questions being addressed, the practical possibilities for research access, and the limitations o f resources (including time) (Burnham, 1997).

1.4.2.1 Factors Influencing the Choice o f Research Methodology

(a) The Nature. Scope and Complexity o f the Research Area

The subject under investigation in this dissertation - micro-regionalisation and networks of multi-level governance among Guangdong (southern China), Taiwan and Japan — is exceedingly complex. It embraces a range of phenomena of an economic, social and political nature and requires an exploration of their inter-relationships and dynamics over time. In particular, the processes being investigated do not fit neatly into formal institutional frameworks. Rather they are innovative, fluid and involve both formal and informal elements. Moreover, they cut across the territorial boundaries between states and exhibit a high degree of fragmentation. In addition, they relate to both the domestic and international spheres of economic organisation and political management.

To make matters even more complex, the existing literature in this research area is limited, and the literature that does exist (both primary and secondary) is mainly in the Chinese and Japanese languages. Since the dissertation is written in English, the researcher frequently had to deal with problems of translation among three languages. These problems were exacerbated by the researcher’s need to undertake interviews in the three countries, which meant that in the cases of China (Guangdong) and Taiwan the researcher had to deal with the task of communicating in Chinese and translating the resulting information into English.

It is also not easy to arrange research interviews in China. In particular, there are still bureaucratic and cultural obstacles to foreign researchers exploring areas that are regarded by the political authorities as sensitive. This is certainly true at the level of Chinese SNGs. Often researchers in this situation have to develop contacts at a social level in order to ‘open doors’. This is indeed one of the most important features o f Chinese social networks, and social networks in turn often provide the basis for business and governmental networks.

For the researcher, the complexity of the area of investigation meant that he inevitably had to be selective in his research focus, and this led directly to the decision to select the electronics industry as a particular case study. One o f the initial tasks, therefore, was to become familiar with how this particular sector operates from an economic and technological point o f view through literature based study. Also, the researcher decided to

concentrate on one specific geographical location: Dongguan in the province of Guangdong. These deliberate choices made the research more manageable but also meant that limitations were posed on the extent of the study’s comprehensiveness and generalisability.

(b) The Key Research Questions

As already explained above, this study employs three main research questions:

How should we define and characterise key components of micro-regionalisation among Guangdong, Taiwan and Japan?

What kinds of policy environment and what actors in the host and home countries are needed to support cross-border economic relations?

How do networks of multi-level governance (MLG) operate to facilitate micro-regionalisation?

Each of these three questions raises methodological challenges. The first question involves an understanding of the nature of micro-regionalisation. The issue o f régionalisation in East Asia is still dominated by three levels of analysis: macro, meso (sub-regional) and micro. This research question focuses on not only the level at which micro-regionalisation actually takes place but also interactions between different levels. The Chinese domestic context o f micro-regionalisation involves the reform of governance through a range of measures implemented by the Chinese central government in recent years and their impact on central-local relations and the scope for local choice and autonomous decision-making. This issue has already been explored by several previous researchers (see Chapter 4). In the international and regional contexts, the empirical records o f the East Asian régionalisation process, which focus more on the economic dimension (i.e. firm-led régionalisation), are readily available (see Chapters 5 and 6), so the research task here is essentially to combine an analysis of the two different streams of micro-regionalisation, i.e. the domestic and the international. Therefore, the main research methods are: literature-based research (including primary and secondary sources) and the analysis, synthesis and assessment of existing sources, supplemented by interview data.

The second research question involves a focus on the policy environment, the underlying economic rationale, and the roles o f the key actors, although, as Henry Yeung (1998)

points out, political and institutional factors cannot be separated from the economic pull’ of the host country or region in attracting inward investment. On a theoretical level there is no shortage of discussion o f the rationale behind inward investment decisions, but the main need in the present research is to gather empirical material from the electronics industry in order to gain a more in-depth understanding of what has motivated Taiwanese and Japanese investors. The policy environment in the home countries (in this case, Japan and Taiwan) cannot be separated from the economic ‘push’ factors for MNCs. Similarly, MNCs’ production networks abroad are to a great extent embedded in their country of origin’s distinctive business practices and managerial styles. There is a wide-ranging existing literature on the East Asian international division o f labour, Japanese FDI, and Taiwanese FDI (see Chapters 5 and 6). In this regard, therefore, literature-based research and analysis are the primary research tools and some interview data are used for supplementation.

The third question concerns the operation and structure of networks of MLG among Guangdong, Taiwan and Japan This is a subject on which there is virtually no reliable literature at the present time. Some of the literature on Chinese SNGs is relevant in the sense that it explains their internal structures and links with central government and also considers SNG’s foreign economic relations (i.e. G. Yeung, 2001a). However, the focus of the present research is on the networking linkages between SNGs and foreign firms. This is explored here through the case of Dongguan with particular reference to the electronics industry. Some information has been gathered from documentary sources, but in addition it has been necessary to rely on interviews with key persons and observations in these processes. Thus, for the final case study, interviewing and observations are the primary research source, and are combined with literature-based research.

1.4.2.2 Resource ¡.imitations

The research for this project was completed within a limited time period: from October 1997 to December 2001. This included a comprehensive literature search, the establishment of an appropriate framework of analysis, the design of a research strategy, and the writing of various drafts of Chapters 1 to 8. Research visits to Guangdong, Hong Kong, Taiwan and Japan took place in 1998 (July to August), 1999 (July to August), 2000 (April and September to October), and 2001 (September and October).

With more time, more finance and more opportunities for research visits and interviews, it would have been possible to broaden the research base for the dissertation. This is a problem for all researchers, especially those involved in international and cross-national investigations. Inevitably, therefore, the present thesis must be seen as an initial, limited study which needs to be expanded further in the future. The emphasis throughout is on achieving a balance between the depth and breadth of research. In general, however, the aim is to achieve an intensive rather than extensive analysis of the subject matter, and to employ a corresponding ‘fine-grained’ rather than ‘coarse-grained’ methodological approach (Harrigan, 1983).

1.4.23 Quantitative and Qualitative Research Methods

Quantitative research is concerned mainly with measurable, statistical indicators, usually linked to the testing o f ‘models’ and hypotheses that are formulated in terms of quantifiable relationships, whereas qualitative research focuses on attitudes, beliefs and patterns o f human behaviour, i.e. the actual practices that can be identified in a particular field of activity. Economics is an example of a field in which traditionally quantitative methods have been dominant, but it is interesting to note that even here there has been a growing interest in the social, institutional and behavioural context of economic activity (North, 1990). In the present research quantitative analysis has a role, for example in terms of data concerning patterns and levels of inward investment, the geographical dispersion of firms, and business performance; but the main focus is on examining interactions between SNGs and firms across national borders. Here qualitative methods are also relevant and are more likely to produce the answers to the key questions about structure and operation of networks of governance. One purpose of the interviews and observations was to obtain essential factual information about the development o f cross-border relations among Chinese SNGs (in Guangdong), Taiwanese and Japanese firms, through various cooperative meetings and forums as well as local business associations.

Unlike most quantitative research, the present research is not primanly concerned with the establishment of causal relationships between two or more variables, with ‘proving’ any specific hypotheses, or with generalising the research findings to other areas of research. It seeks to offer an in-depth analysis of the particular networking relationship of micro-regionalisation in one specific geographical area (micro-region) of the world. For all these reasons, the quantitative approaches are adopted where the aim is to identify patterns

of economic dynamism, and the main approach to the study of networks o f multi-level governance is more qualitative.

1.4.2.4 The Four Research Studies

The dissertation’s four research studies are briefly outlined in the next section. The relationship among the three key research questions, the four studies, and the main research methodologies is summarised in Table 1.1 where the four research studies are referred to as (a), (b), (c), and (d).

Table 1.1 The Research Questions and Methodology

Research Question Research Studies Methodology

(1) How should we define and characterise the key

components of

micro-regionalisation among

Guangdong, Taiwan and

Japan?

(a) Chinese domestic context (b) International (Japanese) context (c) Regional (Taiwan Strait) context

(Primary)

Literature-based analysis (Secondary) Interviews

(2) What kinds o f policy environment and what actors

in the host and home

countries are needed to

support cross-border

economic relations'’

(a) Chinese domestic context (host)

(b) International (Japanese) context (home)

(c) Regional (Taiwan Strait) context (home) (Primary) Literature-based analysis (Secondary) Interviews (3) How do networks of multi-level governance (MLG) operate to facilitate micro-regionalisation'7 (d) Development of cross-border sub-national governmental networks (Primary)

Interviews and observations (Secondary)

Literature-based analysis

(a) The ( 'hoice o f China. Taiwan and.¡apart

Throughout the dissertation, the geographical focus is on three territories: China, Taiwan and Japan. By 1999, Japan had become China’s largest trading partner, and China had

become Japan’s second largest trading partner (Guoji Shanghai), 14 January 2000 and

Tsusansho, 2000). By 1999, Taiwan had become China’s seventh largest trading

pamer(G'i/o// Shanghai), 14 January 2000), and China had become Taiwan's second largest

exports destination (Higashi Ajia eno Shiten, spring special edition 2000). Japan had

become Taiwan’s second largest trading partner by 1999, and Taiwan had become Japan’s

third largest trading partner (Nittai Bijinesu Nyusu, No. 2 2000 and JETRO, www.

Jetro.go.jp/ec/j/trade). Despite increasing economic interconnectedness among the three territories, the national economy-based statistics overlook the deep-rooted restructuring that is occurring at the regional and firm levels (see Chapter 3). In acknowledging the

deficiencies o f the existing approach to China’s foreign economic relations, this thesis seeks to develop a distinctive account o f micro-regionalisation.

(b) The Choice o f the Electronics Industry

Throughout the research studies, the emphasis is on the particular case o f the electronics industry in cross-border economic relations. This sector was chosen for a number of reasons. First, it is the main industrial sector in East Asian industrialisation The share of electronics goods in the total exports in each East Asian country is very high (see Table

1.2).

Table 1.2 The Share of Electronics Goods Exports in the Total Exports of East Asian Countries (Value)

Country (year) S hare of electronics exports in

total exports (%) Taiwan (1999) 43.39 South Korea (1997) 34.63 Malaysia (1997) 50.88 Philippines (1997) 27.70 Singapore (1997) 27.76 Thailand (1997) 30.83 Indonesia (1997) 7.02 China (1999) 22.70

Source: Higashi Ajia eno Shiten (2000), spring special edition

Secondly, the electronics industry is forging increasing economic links among the three countries. The electronics goods exports from China operated by the PTAs accounted for

90% of China’s total electronics goods exports in 1999 (Kokusai Boeki, 16 May 2000).

Foreign firms dominate PTAs, and Japan and Taiwan are the two major contributors. For example, in 1999, exports in electronics goods and parts accounted for 25.5% of total Japanese exports to China and 14.6% of total imports to Japan from China (Tsusansho, 2000: 176-8).11 In the same year, 23.7% of Taiwan’s total exports to mainland China and 30.9% of total exports from the mainland to Taiwan consisted of electronics goods and

parts (Koryu, No.618, 2000).12 Also, exports in the electronics industry accounted for

24.5% of total Japanese exports to Taiwan, and 23.4% of total imports to Japan from Taiwan in 1999 (Tsusansho, 2000: 186-7).13 The electronics industry is already the leading industry in Japan and Taiwan and is emerging as China’s most important industry in terms o f imports and exports.

(c) The C twice of 'Guangdong and Dongguan

The choice of Guangdong and its one rapidly growing city, Dongguan, for special attention is related to the trade structure discussed above. Guangdong, especially the Pearl River Delta Area, is the largest site for PTAs in the electronics industry. Indeed China’s exports owe much to the coastal area, especially Guangdong province, which has been in the first rank in exports for the last 15 years. For example, in 1998, Guangdong’s share of trade was

equivalent to 40.6% of China’s total imports and exports (ZTN, 1999). In 1999,

Guangdong’s share of trade was 39.9% of China’s total imports and exports (Guoji

Shanghai), 20 January 2000).

In Guangdong’s imports, Japan and Taiwan have been two major partners, accounting for more than 40% of the total. This relates to the trend of Guangdong’s inward FDI. Manufacturing investment accounts for a large part of total FDI in Guangdong: 86.3% in

1990, 69% in 1995, 66% in 1997, and 55.7% in 1998 (Guangdong Tong/i Nianjian:

hereafter (TIN, 1999). As far as the PTAs are concerned, in 1999 they accounted for 77.7%

of the province’s total exports, which is equivalent to 54.5% of China’s total PTAs in exports. Thus, Guangdong is the central place for China’s PTAs, which are structually dependent on Japan and Taiwan for imports, and on the US and EU market for exports. Furthermore, electronics goods exports are the major sector; for example, half of

Guangdong’s exports in 1999 were in electronics goods and machinery (Aogang Xinxi

Ribao, 14 January 2000).

Secondly, when the analysis is brought down to the sub-provincial level, inward FDI is focused on the Pearl River Delta. In 1998, the total exports from the Shenzhen and Dongguan reached 52.1% of total exports from Guangdong (Maruya, 2000: 143).14 Shenzhen has been the top city in the volume o f trade for seven consecutive years, and its

average annual growth rate from 1980 to 1999 was a remarkable 31.2% (Kokusai Boeki, 6

December 2000). Dongguan has also emerged as the site of the highest concentration of

Taiwanese electronics firms (the number is almost 3,200) on the mainland (Sinoruma,

February 2000). In particular, the role of foreign firms in the industrial output in both cities is remarkable. Their share of the total industrial output was 75.9% in Shenzhen and 86.1% in Dongguan in 1998 (Maruya, 2000: 143). Furthermore, the concentration on electronics and telecommunication equipment is especially remarkable. From 1991 to 1998, the value of the industrial output of electronics and telecommunication equipment grew from

40.65% to 58.28% of the total value of Shenzhen’s industrial output (Lu, 2000: 64). In terms of Shenzhen’s trade relations, Japan is the largest source of imports and Taiwan is the second. Thus, Shenzhen and Dongguan clearly exhibit the new patterns of cooperation at the micro-regional level among China, Taiwan and Japan. Economic relations among China, Taiwan and Japan are becoming exceedingly complex at the micro-regional level, and this necessitates an investigation o f the links between Japanese and Taiwanese FD1 and their links to changes of industrial structure in the Pearl River Delta.

(d) Four Studies

In the Chinese domestic context, the first case study seeks to answer the first and second

research questions: how should we define and characterise the key components o f

micro-regional isat ion among Guangdong, Taiwan and Japan''' and what kinds o f policy environment and what actors in the host and home countries are needed to support cross-border economic relations? By using previous research findings, the first case study seeks to demonstrate the key features o f Chinese domestic governance reform towards a multi-level structure and the emergence of SNGs as economic actors. Specific measures include the decentralisation of economic management, regional development policies, the establishment of special economic zones and open cities, the increasing role of cities in Chinese administration, and the relations between Guangdong and the centre. This thesis argues that the centre’s initiatives and strategies have induced a dramatic increase of local autonomy and helped to change the dynamics of economic scale. Micro-regionalisation in the Chinese domestic context is a state-led institutionalisation process but has created new forms of multi-level governance (MLG).

While the central government continues to exercise a decisive role in setting standards and formulating macro-organisational policies, it would be wrong to see Chinese domestic régionalisation as a purely linear process. Rather there are many variations o f path development and complicated sets of interactions among actors and institutions. Therefore, the Chinese domestic context of MLG cannot be generalised. Despite the limitations o f the capacity of SNGs, the increase o f local autonomy in foreign economic management is a key factor in the creation of micro-regionalisation. This case study examines the increase of local power in Guangdong province and its changing relations with the centre.

From the international perspective, the second case study also seeks to answer the first and

second research questions. However, the second case study focuses more on de facto

processes of micro-regionalisation based on firm-led economic régionalisation. Japanese direct and indirect (through Hong Kong and Taiwan) investment in the electronics industry is selected for special attention. After exploring the organisational features of Japanese

firms (keiretsu), the size of firms, managerial structures, and systems of centralisation, we