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Endogenous versus exogenous development Dataset · January 2015

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127 3 authors, including: Yong-Sook Lee Korea University 30 PUBLICATIONS 255 CITATIONS SEE PROFILE

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Environment and Planning C: Government and Policy 2009, volume 27, pages 612 ^ 631

doi:10.1068/c0881b

Endogenous versus exogenous development: a comparative study of biotechnology industry cluster policies in South Korea and Singapore Yong-Sook Lee

Department of Public Administration, Korea University, Anam-Dong, Seongbuk-Gu, Seoul 136-701, Korea; e-mail: [email protected]

Ying-Chian Tee

Department of Humanities, Bedok South Secondary School, 1 Jalan Langgar Bedok, Singapore 468585; e-mail: tee ying [email protected]

Dong-wan Kim

Graduate School of Environmental Studies, Seoul National University, 599 Gwanak-ro, Gwanak-gu, Seoul 151-742, Korea; e-mail: [email protected] Received 15 July 2008; in revised form 20 March 2009

Abstract. With this study we aim to develop a theoretical understanding and to assess policy implications of cluster development in the context of a knowledge-driven, globalizing Asian economy. We will examine both the strengths and the limitations of recent biotechnology cluster policies in South Korea and Singapore. We argue that the two states share similar experiences in terms of the state's proactive role as a cluster creator, but that they have promoted biotechnology industry clusters in contrasting ways due to different national politics and political institutions. South Korea places more emphasis on endogenous capabilities, while Singapore highlights the importance of exogenous capabilities in biotechnology cluster development. By analyzing the advantages and disadvantages of these contrasting cluster policies, we evaluate the long-standing debate between endogenism and exogenism in the study of regional development. Instead of these dualistic approaches, we employ a global production network analytical lens for understanding the dynamic interactions between localized growth factors (endogenous) and globalizing external factors (exogenous) in the context of Asian biotechnology cluster development. We adopt a multipart strategy that includes archives, surveys, in-depth interviews, and secondary source data collection in order to enhance the validity and reliability of the data.

1 Introduction Technology clusters have become a powerful policy tool in the knowledge-based economy (Dunning, 2000; OECD, 1999; 2001; Porter, 1998; Scott and Storper, 2003). One of the key issues that have drawn particular interest from policy makers and academics is the role of the state in cluster formation. Since Porter's work on the subject (1998; 2000), more recent studies have provided empirical support for the role of the state as a facilitator in new industry cluster development, mostly in the West European and North American contexts. There are relatively few empirical studies of cluster policies and the role of the state in cluster development in Asia. With this study we attempt to present empirical findings on clusters and to critically evaluate cluster policies in Asia. In this paper we aim to develop a theoretical understanding and to assess policy implications of cluster development in the context of knowledge-driven, globalizing Asian economy. On the basis of the global production network (GPN) perspective, we offer a comparative framework for exploring how the state in the knowledge-driven global economy can play a role in cluster development in Asia. More specifically, we examine both the strengths and the limitations of recent biotechnology cluster policies in South Korea and Singapore, paying attention to the similarities and differences in the cluster

Biotechnology industry cluster policies in South Korea and Singapore

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formation processes involved. We argue that the two states share similar experiences with regard to the state's proactive role as a cluster creator, but that they have promoted biotechnology industry clusters in contrasting ways due to different national politics and political institutions. South Korea places more emphasis on endogenous capabilities, while Singapore highlights the importance of exogenous capabilities in biotechnology cluster development. By analyzing the advantages and disadvantages of these contrasting cluster policies, we evaluate the long-standing debate between endogenism and exogenism in the study of regional development. Instead of this dualism, we employ a GPN lens for understanding and evaluating biotechnology cluster development because it provides a better analytical framework for understanding the multiscalar view of the dynamic interactions between localized growth factors (endogenous) and globalizing external factors (exogenous) in the context of Asian cluster development. Through this GPN lens the two states' approaches are more clearly contrasted. We have chosen to examine biotechnology industry clusters because they are a prominent example of the new industry clusters in the knowledge-based economy.(1) South Korea and Singapore have been selected not only because both countries have sought to move toward a knowledge-based economy, but also because they have actively promoted biotechnology cluster development within the context of a centralized state. Owing to this centralized state structure, the institutional and developmental histories of the South Korean and Singaporean industry clusters stand in contrast to those of the Western cluster models. Our study of biotechnology clusters in Singapore and South Korea is based on a multipart strategy using a mixture of primary and secondary sources to enhance the validity and reliability of the data. We combine techniques that rely on surveys, in-depth interviews, archival analyses, site visits, and longitudinal data from government annual reports. We conducted in-depth interviews with a total of seven personnel from biomedical firms, government organizations, research institutes, a biomedical incubator center, and a venture capital firm in Singapore. In South Korea we carried out interviews with fifteen key policy makers and personnel in the Ministry of Commerce, Industry, and Energy (MOCIE), the Ministry of Science and Technology (MOST), other government organizations, government-funded research institutes, the biotechnology industry association, and biotechnology venture firms. Although we adopted a multipart strategy to enhance the validity and reliability of the data, our research has some methodological limitations. Since the emergence of biomedical industry clusters is a recent phenomenon, their impact cannot be fully assessed in a snapshot analysis. In addition, it was difficult to collect comparable data and conduct interviews due to the different levels of democracy and data collection systems in the two countries.(2) The remainder of this paper is divided into four sections. First, we critically review an important debate on cluster development (exogenism versus endogenism) (1) Cooke (2001a; 2002b; 2002c; 2004; 2008; Cooke and Huggins, 2004) has written insightful studies on biotechnology clusters in the UK, the US, Germany, and Canada from the viewpoint of the regional innovation system. He argues that biotechnology clusters are important intellectually and for policy deliberation since biotechnology is becoming a core competence in the globalizing knowledge economy due to its wide applications in the health, agrofood, energy, and environmental sectors. (2) In particular, data on the number of patents, sale revenues, and tax revenues were unavailable from Singapore since the state does not release them. Also, most of the information and references we used in the study were published by the Singapore state and thus were inherently biased towards the state.

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and introduce the GPN framework as an alternative framework for comparing biotechnology cluster policies in South Korea and Singapore. Second, we detail the recent state-led biotechnology cluster creation in both Singapore and South Korea in the section on background and context. Third, we contrast the exogenous nature of biomedical cluster creation in Singapore with the endogenous nature of biotechnology cluster formation in South Korea from the GPN perspective. We then critically evaluate their contrasting cluster development policies. In the concluding section we suggest the wider theoretical and policy implications of our study on new cluster formation. 2 New industry cluster development and GPNs A long-standing debate in academic and policy circles is how emerging clusters developöexogenously or endogenously. One side emphasizes external conditions as the primary determinants of cluster development, while the other side argues that internal conditions, such as institutional structures and capacities, are the main determinants. Both sides may be criticized for their single-minded focus and their failure to recognize the dialectic nature of external and internal forces. 2.1 Exogenism versus endogenism

The exogenous school originated from the growth pole approach based on the concept of cumulative causation, as presented by Hirschman, Myrdal, and Perrouz (Scott and Storper, 2003). The growth pole approach was widely adopted in postwar development policies implemented from 1945 to 1980. The normative question in the growth pole approach was how regional disparities could be reduced, and how a policy of distributing industrial growth from more prosperous regions to depressed areas could be implemented (Hall, 2002). The growth pole approach considered exogenous factors (that is, foreign investment and trade) as the main determinants of economic development and growth; thus, it relied on an investment policy that focused on inducing investments from external sources (either from abroad or from more prosperous regions within the nation) (Hall, 2002). The implication of the growth pole approach in relation to cluster development is to encourage direct involvement by the state in cluster creation. Although the growth pole policy contributed to creating new industrial enclaves in UK peripheral areas by relocating manufacturing plants, it failed to reduce the continuing dominance of London and to lessen regional disparities between London and the rest of the UK (Hall, 2002). Owing to this failure and the worldwide shift toward a knowledge-based economy, its academic influence has faded. A more recent exogenous development school of thought is called the global commodity chains and global value chains (GCCs ^ GVCs) approach (Gereffi, 1994; 1996; Humphrey and Schmitz, 2001). Although its normative stance on growth is different from the growth pole approach, it also highlights the importance of external factors in development. The GCCs ^ GVCs approach has its roots in dependency theory, but it overcomes the static-core ^ semiperiphery ^ periphery division, offering room for development to developing countries (Henderson et al, 2002). The approach considers the organizational structures of global firms' production systems as the determinants of growth and explores how nations are transformed by flows of capital, labor, and knowledge öall of which are regarded as external factors. In particular, the school places more emphasis on the specific conditions that attract foreign direct investment (FDI) for cluster development. Singapore, Bangalore, and Ireland are the best cases to support this exogenous approach based on FDI-led regional development strategies.

Biotechnology industry cluster policies in South Korea and Singapore

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These cases show how multinational corporations (MNCs) can promote local knowledge accumulation and diffusion in industrial clusters in the developing world (Coe, 1997; Fromhold-Eisebith, 2002; Yeung et al, 2001). Despite this contribution, serious doubts have been raised by some scholars about the quality of knowledge that is transferred by MNCs (Phelps, 2008; Phillips and Yeung, 2003). Overall, the exogenous school (including the growth pole and the GCCs ^ GVCs approaches) has been criticized for being overly preoccupied with external linkages at the expense of internal institutional factors and dynamics. The endogenous school of development can be traced back to the late 19th century and Alfred Marshall's work on industrial districts in the UK; his influence on cluster studies is clear. Drawing upon Marshall's work, Krugman (1997) and Porter (1998; 2000) (3) contributed to the revival of cluster studies in different disciplines. Their work, the `new geographical economics', seeks to analyze spatial agglomeration of industry using advanced mathematics and computational techniques. Both Krugman and Porter have contributed to the renewed focus on clusters as spatial agglomeration. The most prominent recent approach that highlights the endogenous school of development is `new regionalism' (Amin and Thrift, 1994; Asheim, 1996; Cooke, 1998; 2002a; 2002c; Cooke and Morgan, 1998; Florida, 1995; Saxenian, 1994; Scott, 1993; Storper, 1997). This literature considers the development of the knowledge-based economy as a natural and inevitable path to follow; it advocates a change in development strategy from a top-down approach led by the state to a bottom-up approach led by local institutions. Following the earlier regional scientists such as Scott (1993), Saxenian (1994), and Florida (1995),(4) more recent scholarship has focused on theoretical explanations of the nature, cause, types, and evolution of clusters [see special issues on clusters: Urban Studies (41 959 ^ 1195), European Urban and Regional Studies (12 203 ^ 307), European Planning Studies (12 915 ^ 1072), and Small Business Economics (17 1 ^ 153)]. These studies highlight the importance of spatial agglomeration in the context of a globalizing knowledge-based economy (Cooke, 2001b; Cooke and Morgan, 1998; Lawson and Lorenz, 1999; Morgan, 1997; Simmie, 2003). They emphasize the role of knowledge, innovation, and learning processes in sustaining clusters, arguing that knowledge creation through learning and innovation is a source of competitive advantage. Concepts such as `knowledge spillover', `regional innovation system', `learning region', `innovation milieux', and `institutional thickness' have been developed by this school to explain cluster development (Breschi and Lissoni, 2001; Cooke, 2001b; Henry and Pinch, 2000; Keeble et al, 1999; Morgan, 1997). This approach places particular emphasis on internal factors (cultural or institutional conditions such as economic behavior and social capital). More specifically, it focuses almost exclusively on local and regional systems of economic and social relations, arguing that local actors' activities and networks are the most crucial success factors for development in a globalizing economy (Hess, 2004). Despite providing a new way of thinking about development, the endogenous school has been challenged by critics of clusters and learning regions. A number of (3) Porter's work (1998; 2000) has gained widespread popularity in policy circles due to its easy `business-friendly and policy-friendly' writing style rather than its theoretical or empirical superiority (Martin and Sunley, 2003). However, more studies are providing critical views of Porter's work; his concepts, evidence, and measurements have been criticized for being unclear and incoherent (Cumbers and MacKinnon, 2004; Markusen, 1999; Martin and Sunley, 2003; Perry, 2004; Phelps, 2004). (4) These authors argue that clusters offer key competitive advantages over vertical integration for individual firms with respect to productivity, innovation, and new business formation.

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critiques point to the ideological bias of the school, which, they argue, takes an uncritical view of the knowledge-based economy and the new regionalism (Cumbers and MacKinnon, 2004; Lovering, 1999; MacLeod, 2001; MacKinnon et al, 2002). Other scholars, who argue for the importance of external linkages in cluster formation, criticize the excessive focus of the endogenous school on localized social networks and learning processes (Bunnell and Coe, 2001; Henderson et al, 2002; Malmberg, 2003; Wolfe and Gertler, 2004). These critics argue that the endogenous school ignores the importance of regional, national, and global institutions in cluster development (Benneworth and Henry, 2004; Coe et al, 2004; Wolfe and Gertler, 2004). 2.2 GPN approach

In response to critics, these two schools have attempted to address some of their shortcomings. From the exogenous school, Gereffi et al (2001) and Humphrey and Schmitz (2001) began to stress the importance of `local upgrading' through local actions and initiatives within the context of externally sourced investment and funding. From the endogenous school, Cooke (2002b) began to recognize the importance of external connections to global markets for collective learning and innovation. He used the term `multilevel governance' to conceptualize both internal and external factors influencing biotechnology clusters. Also from the endogenous school, Bathelt et al (2004, page 31) began to highlight the importance of the coexistence of high levels of `local buzz' and `global pipelines' in the process of knowledge creation. As a result the two schools have begun to move closer together by constructing a more nuanced view of development that addresses the dialectic nature of external and internal factors. A more balanced and nuanced view has been suggested by the GPN approach (Coe et al, 2004; Henderson et al, 2002). The GPN approach falls within the multiscalar view, which stresses multiscalarity of the forces and processes underlying regional development in the context of globalization. The GPN approach is capable of explaining both global and regional (local) dimensions of the processes involved in many forms of economic globalization. On the basis of the GPN perspective, Coe et al (2004) use the term `strategic coupling' to explain the way in which localized growth factors serve the strategic needs of translocal actors in cluster development. They highlight three sets of conditions for successful cluster development: first, ``the existence of economies of scale and scope within specific regions'' (page 470); second, ``the possibility of localization economies within global production networks' (page 470); and, last, ``the appropriate configurations of `regional' institutions to `hold down' global production networks and unleash regional potential'' (page 470). They focus on ``the interactive complementarity and coupling effects between localized growth factors and the strategic needs of trans-local actors in propelling regional development'' (page 469). By analyzing the dialectical connections between the flows (as external factors) and the places (internal factors), the GPN approach attempts to conceptualize `globalizing' regional development and the dynamics of global and regional and local actors' interaction in cluster development. Therefore, the GPN approach provides a better analytical framework for understanding globalizing cluster development by incorporating both external and internal factors. 3 The state and biotechnology cluster creation in Singapore and South Korea Our focus in this section is on the role of the state in new industry cluster formation in Singapore and South Korea. In the Asian context the developmental state leads the nation in promoting economic change. To achieve national economic development,

Biotechnology industry cluster policies in South Korea and Singapore

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the state utilizes policy tools such as public ownership, planning, goal setting, and strategic industry promotion. The state further encourages cooperation among businesses (either domestic or foreign) and controls labor ^ management relations to speed the adoption of new technology, to reduce production costs, and to increase the nation's share of the global market (Johnson, 1982; Park et al, 2009). Singapore and South Korea also share a similar political-economic context underlying the role of the developmental state. In the historical context of industrialization, the state has played proactive roles in shaping industrial location through national industrial and regional policies in Singapore and South Korea. In the stateled industrial build-up stage (from the 1960s to the 1970s) the state in both countries launched national economic plans and created strategic industries. In the 1980s both states also actively undertook industrial restructuring through a sectoral shift from labor-intensive light industries to more capital-intensive heavy industries. In the 1990s Singapore and South Korea began the shift toward a knowledgebased economy along the Western model. In both countries the state was the main actor in promoting the knowledge-based economy as a desirable new paradigm of economic development and clusters as a powerful policy tool for achieving growth in the knowledge-based economy. 3.1 State-led knowledge-based economy and cluster policy

In Singapore a 1998 speech by Deputy Prime Minister Tony Tan confirmed the state's intention in moving toward a knowledge-based economy: ``We will have to move our economy quickly and effectively into a knowledgebased economy and ride on the weightless world of the 21st century as we have successfully ridden on the trading and manufacturing world of the 20th century''.(5) By the late 1990s the term `knowledge-based economy' became the common language of all policy makers and the media in Singapore (Coe and Kelly, 2000). In this context, the Singapore state utilized clusters as a powerful policy tool for boosting economic growth in the knowledge-based economy, and actively intervened to create a biotechnology cluster in the 21st century (Yue and Lim, 2002). While the term knowledge-based economy has risen to prominence since the late 1990s in Singapore, it did not become dominant in South Korea until the mid-2000s. Instead, the term `globalization' rose to prominence in the 1990s as the dominant term describing South Korea's economic development strategy. From the early 1990s the state eagerly promoted the globalization of its economy in the face of intensified global competition. In its new economy Five-Year Plan (1993 ^ 97) (EPB, 1993) the state focused on liberalization and enhancing the international competitiveness of the Korean economy (Park, 2005). In its search for a new engine of growth, the state promoted high-tech industries and research and development (R&D) activities. As a result of the new economy plan, South Korea reorganized its industry structure and composition, and the information technology industry emerged as the major engine of growth in the 1990s (Park, 2000). After witnessing state-led shifts toward the knowledge-based economy in Singapore and Hong Kong, the Korean state also pushed for a shift toward a knowledge-based economy more explicitly in the early part of this decade (Kim, 2007). The state actively pursued cluster promotion policies as best practices in the knowledge economy (Yoo, 2005).

(5) ``The Singapore economy in the 21st century'', Chinese High Lecture, Singapore, 6 August 1998 (cited in Coe and Kelly, 2000, page 418).

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3.2 Biotechnology clusters as industrial policy

The biotechnology clusters in Singapore and South Korea have evolved due to the development strategies of both states, which have actively created clusters through explicit industrial policies based on strategic targeting. In 2000 Singapore explicitly signaled its intention to target the biomedical industry (Finegold et al, 2004). To create a biomedical industry cluster the state has: (1) established exclusive government agencies to promote the industry; (2) provided tremendous amounts of funding to the industry; and (3) influenced industrial location by constructing industrial parks and facilities. To create a biomedical cluster the Singapore state set up three main agencies to oversee the promotion of the industry: (1) the Agency for Science, Technology and Research (A*STAR); (2) the Economic Development Board Biomedical Science Group (EDB BMSG) (6); and (3) Bio*One Capital (A*STAR, 2006). A*STAR focuses on boosting R&D activities, EDB BMSG is in charge of biomedical manufacturing and operations, and Bio*One Capital manages biomedical investment funds (A*STAR, 2006). Next, the state provided funds to the biomedical industry to implement the biomedical cluster plan. The state has provided huge grants and tax incentives to biotechnology firms in order to boost biomedical cluster growth (Biomed Singapore, 2005). The state has also played a crucial role as an industrial locator in creating the biomedical cluster. Relying on Porter's cluster concept, which highlights the importance of geographic proximity, the state has encouraged the biomedical industry to concentration in the western part of Singapore. The state constructed the Biopolis, a biomedical R&D park, and the Tuas Biomedical Manufacturing Park in western Singapore, where the Singapore Science Park, the National University of Singapore, and

Malaysia (Johor)

Malaysia (Johor)

First causeway

P Ubin Tuas second link

Singapore Tuas Biomedial Park

P Tekong National University of Singapore Singapore Changi National University Hospital Airport Singapore science parks Biopolis

Bio R&D Cluster

Sentosa 0

2

4

6

8

10 km

Figure 1. The location of biotechnology clusters in Singapore (source: prepared by L K Lee, Department of Geography, National University of Singapore). (6) The Economic Development Board (EDB) is the leading government agency for promoting economic development in Singapore.

Biotechnology industry cluster policies in South Korea and Singapore

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the National University Hospital are already located (see figure 1). These achievements are the outcome of an industrial policy that relies on the state to develop the biomedical sector.(7) While Singapore's biomedical cluster has emerged rapidly since 2000, South Korea's biotechnology clusters have evolved at a relatively slower pace over several decades. Based on the Korean state's strong drive and support, a government-funded research institute was set up, and biotechnology-related departments were established in major universities throughout the country in the 1980s. In the 1990s the state attempted to leap forward in biotechnology development by implementing the 1994 Basic Plan for the Promotion of Biotechnology [Biotech 2000, 1994 ^ 2007 (MOST, 1993)]. On the basis of this plan the state vastly expanded its investment in biotechnology R&D, which involved eight ministries.(8) In the 2000s the state further expanded its promotion of the biotechnology industry in the context of a knowledge-based economy and globalization. The state began to promote the cluster concept in developing biotechnology beginning in the mid-2000s. Several regional biotechnology centers have begun to emerge outside the Seoul metropolitan area as an outcome of MOCIE's regional cluster policy (MOCIE internal document). As a result of the state's biotechnology industry policies under several administrations over almost three decades, 668 biotechnology-related companies had emerged in South Korea as of 2005. The number of R&D personnel in the biotechnology industry increased from 1889 in 1997 to 7430 in 2005, and the number of production employees increased from 1411 in 1997 to 6347 in 2005 (BAK, 1997) (also a KIET internal document). 4 Different pathways of biotechnology cluster policies in Singapore and South Korea Although Singapore and South Korea share much in common in terms of their governments' proactive roles in promoting biotechnology industries, the ways their biotechnology clusters have developed differ. The Singapore state, which has followed a path similar to the GCCsöGVCs approach, has taken an exogenous view of cluster creation. On the other hand, the South Korean state, which has been strongly influenced by the new regionalism approach, has placed more emphasis on developing endogenous capabilities in biotechnology clusters. This difference stems from the two countries' different national politics and political institutions. 4.1 Exogenous way of biomedical cluster development

As a unified city state, Singapore focuses its institutional capacity on maintaining political stability and policy consistency (Olds and Yeung, 2004). The state's institutional capacity is based on a number of powerful government agencies. In this political context, the state has been able to target the biomedical industry. On the basis of this strategic targeting, the state has narrowly defined the biomedical industry as focused on advancing knowledge in engineering, biology, and medicine, and improving human health through cross-disciplinary activities that integrate the engineering sciences with the biomedical sciences and clinical practice (http://www.a-star.edu.sg/astar/biomed/ action/biomed bms.do). In its biomedical cluster development the state has taken an exogenous approach by utilizing external networks and by attracting foreign firms and talent as the main (7) Refer

to Lee and Tee (2009) about more specific achievements. eight ministries are MOST; MOCIE; the Ministry of Agriculture and Forestry; the Ministry of Health and Welfare; the Ministry of Environment; the Ministry of Maritime Affairs and Fisheries; the Ministry of Education and Human Resources Development; and the Ministry of Information and Communication. (8) These

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actors in cluster formation and operation. This exogenous strategy is possible since the state is insulated from competing interests of classes and social groups and has the political capacity and legitimacy to mobilize strategic resources to achieve its objectives.(9) In biomedical cluster creation the state has highlighted the importance of external global networks and actors in the following four ways. First, the state mobilized its organizational networks internationally through the setting up of EDB offices in strategic overseas locations (Boston, Washington, DC, and London). This move was designed to help Singapore gain access to information on the latest biotechnology industry trends (that is, basic research or demand from customers) and to cutting-edge biotechnology from world-class biotechnology companies in the US and UK (Shahi, 2004). Through these international networks the state conducted an intensive study of the leading countries' approaches in this industry. These external networks helped the state to play a major role as a catalyst in funding activities and as a lead biotechnology user (Finegold et al, 2004). Second, the state attracted global pharmaceutical giants such as GlaxoSmithKline, Merck, Pfizer, Schering Plough, Aventis, Baxter, and Becton Dickenson to Singapore (Sitathan, 2002). The state offered these companies substantial tax incentives designed specifically for foreign biomedical firms (table 1). In contrast, local biomedical firms were able to benefit only from a single tax deduction. This exclusive targeting of foreign firms rarely happens in other nations, because indigenous domestic interests tend to oppose such measures. Owing to the state's efforts, foreign firms have become dominant in the Singapore biomedical sector. As of 2005, out of 172 biomedical firms, 104 firms were foreign while 68 firms were local. Foreign firms have also been responsible for a rise in R&D in Singapore by investing significantly in R&D activitiesöforeign firms made up 63% of the total private sector R&D biomedical expenditures (S$ 150.1 million) in 2004 (A*STAR, 2006). Third, the state took a proactive approach in attracting top international talent for the purpose of securing highly skilled research scientists and engineers (RSEs) and boosting R&D activities. A*STAR offered generous financial incentives to attract topnotch international scientists to head research facilities in Singapore. Foreign RSEs are paid highly in Singapore compared with other countries, and the majority of foreign RSEs are given senior positions in research teams or have the opportunity to lead teams of junior scientists (table 2). Owing to the state's efforts, the number of researchers and scientists in the biomedical industry greatly increased from almost none prior to 2000 to 2266 in 2002, and 2962 in 2006 (A*STAR, 2002; 2006). Although official data that show the ratio of foreign to local RSEs are not yet available,(10) most of the RSEs in Singapore's biomedical sector are foreigners.(11) Finally, the state has relied mainly on external networks such as partnerships and joint ventures with foreign biomedical firms. At the same time the state has felt it necessary to nurture local firms in order to embed R&D activities in Singapore. In order to boost indigenous R&D activities the state has chosen government-linked companies (GLCs) as the main local actors. The state, however, also recognized early (9) Interviews with the managing director of SinBio 1 (6 March 2006) and a professor at the National University of Singapore (1 March 2006) confirm this. They state that the government was able to attract foreign biomedical companies and foreign talent since there were few local counterparts. Even local biomedical firms were directed by the government through its control of strategic resources. (10) These data are politically sensitive, so the Singapore government has been slow to release them to the public. (11) Interview with a managing director at BioIncubator on 16 February 2006 and a senior researcher at SinResearch on 17 February 2006.

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Table 1. Tax incentives offered by the Singapore government (source: Biomed Singapore, 2005). Types of schemes

Details of scheme

Target group

Pioneer incentive

Awards full corporate tax exemption on qualifying profits for a set period Awards projects that are strategic, resulting in the creation of desirable industries in Singapore

Foreign biomedical firms

Development and expansion incentive

Provides preferentially lower corporate tax rates for a set period on all qualifying profits above a predetermined base Encourages companies to move into higher value-added activities; this incentive is only awarded to projects that generate significant economic spinoffs in Singapore

Foreign biomedical firms

Investment allowance

Allowance on qualifying equipment costs incurred within a set period Allowance is extended to investment that should result in greater efficiency in resource utilization or the introduction of new technologies into existing industry

Foreign biomedical firms

Research and development (R&D) and intellectual property (IP) management hub scheme

Encourages companies to channel more funds into R&D activities

Foreign biomedical firms

Enhanced tax deduction for R&D expenses

Enables companies to claim tax deductions on expenses related to R&D outsourced to any R&D organization, local or overseas Helps companies find the best R&D capabilities available, and encourages them to control and fund their R&D activities from Singapore

Foreign biomedical firms

Single tax deduction for patents

Tax deduction for costs related to patents, which includes Singapore-based companies and businesses Encourages more companies and businesses to patent their inventions and make Singapore an attractive base for IP management

Foreign and local biomedical firms

on that nurturing successful biomedical R&D capabilities and activities within Singapore would be a long term project. This recognition led the state to pursue partnerships and joint ventures with foreign firms in order to reduce the challenges and risks involved in the long processes of building up endogenous R&D capabilities. Through this cooperation with foreign biomedical firms the state gained access to patented products and technologies owned by foreign biomedical firms within a short time frame.(12)

(12) See

footnote 11.

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Table 2. List of eminent scientists and researchers in Singapore (source: MIT, 2006). Researchers/scientists

Former position/institution

Current position/institution

Professor Edison Liu

Director of Clinical Research at the National Cancer Institute, National Institutes of Health, US

Executive Director of the Genome Institute of Singapore

Professor Sir David Lane

World-renowned discoverer of the p53 gene, and professor at Dundee University

Executive Director of the Institute of Molecular and Cell Biology (IMCB)

Professor Jackie Ying

Professor at the Massachusetts Institute of Technology

Executive Director of the Institute of Bioengineering and Nanotechnology

Dr Alan Colman

Developed the first cloned mammal, Dolly, in 1996

ES Cell International

Dr Sydney Brenner

Nobel Laureate and distinguished professor at the Salk Institute

Chairman of the Biomedical Research Council (BMRC) and head of the Genetic Medicine Laboratory at the Centre for Molecular Medicine (CMM)

Professor Sir George Radda

Professor and Chairman of the Department of Physiology, Anatomy and Genetics at the University of Oxford

Member of the BMRC board

Professor Axel Ullrich

Director of the Department of Molecular Biology at the Max Planck Institute of Biochemistry in Martinsried, Germany

Head of the Singapore OncoGenome project at the CMM

Professor Lady Birgitte Lane

Professor at the University of Dundee

Principal investigator at the CMM

Dr Neal Copeland and Dr Nancy Jenkins

Leading cancer geneticists from the US National Cancer Institute

Head of an IMCB research team using mouse genome to study human diseases

Dr Yoshiaki Ito

Cancer expert from Kyoto University

Head of an IMCB research team studying stomach cancer and head of the National University of Singapore's Oncology Research Institute

4.2 Endogenous approach to biotechnology cluster creation

The South Korean state, which harbors the institutional and regulatory legacies of the developmental state, has undergone restructuring due to democratization, devolution, and the Asian financial crisis (Chang, 2007; Chang et al, 1998; Kim 1993; Shin, 2007). Although it has unique ideological, political, and institutional configurations as a developmental state, the state has interacted with the market, local governments, and citizen groups. In the context of state restructuring, the state has taken an endogenous approach by nurturing local talent and promoting local firms and institutions in

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cluster creation. The president of the Bioindustry Association of Korea, who has promoted the industry since the mid-1980s, confirms this: ``It is almost impossible to take the exogenous way by attracting foreign capital and foreign talent in promoting biotechnology because Koreans have the strong anti-sentiment against foreign capital especially after experiencing the economic crisis. The government was not able to select any particular interest group even among local groups in the context of democratization. Targeting was possible until the mid-1980s, but not longer. Biotechnology was just one of many strategic industries. The government did not target any strategic field of biotechnology by loosely defining it as including eight fieldsöbiopharmaceuticals, biochemicals, bioenvironments, bioenergy and resource, biofoods, bioelectronics, bioprocess and engineering, biotest and informatics.'' (13) In the mid-1980s the state first began setting up internal institutions to spur development of the biotechnology sector. In 1985 the Genetic Engineering Center (GEC), a government-funded national research institute, was established. The GEC changed its name to the Korea Research Institute of Bioscience and Biotechnology (KRIBB) in 1995, and the role of the KRIBB has been to boost national biotechnology R&D activities and to build up national biotechnology infrastructure. In addition the state financially supported major domestic universities in establishing biotechnology-related departments and programs throughout the country. Thus, one year after the enactment of the Genetic Engineering Promotion Law in 1983, forty universities had established biotechnology-related departments. Biotechnology-related research personnel increased from 17 in 1982 to 400 by the late 1980s.(14) This research workforce was composed not of foreign talent but of local personnel.(15) Second, the state concentrated on promoting local firms, rather than attracting foreign firms, in creating the biotechnology sector. The state provided financial incentives such as tax breaks and subsidies to local start-up firms. Owing to this state support, many new biotechnology companies have emerged since the 1980s. As of 2005 there are approximately 668 firms in the biotechnology sector in South Korea. Of these firms, only forty-four companies are large, while the rest are small and medium-sized companies. The majority are Korean firms, with only twenty eight being foreign transnational corporations (TNCs) located in the Seoul metropolitan area (KRPIA, 2005). These foreign TNCs, however, are mostly branch offices or importers targeted mainly at the Korean domestic market. Few of these firms are composed of innovators who contribute to technological development in the country. To nurture Korean firms as large global players, the MOCIE founded the Bio-Star Project in 2005 with a total budget of S$ 130 billion won.(16) Third, the state has pursued a biotechnology cluster policy as a strong tool for achieving indigenous regional development.(17) MOCIE fostered several regional biotechnology clusters outside the Seoul metropolitan area for the purpose of reducing regional disparities (table 3).(18) The biotechnology clusters are fairly decentralized in (13) Interview

with the President of the Bioindustry Association of Korea, 13 November 2006. footnote 13. (15) See footnote 13. (16) Interview with two deputy directors of MOCIE, 20 November 2006. (17) This indigenous policy reflects the local demands from the nonmetropolitan regions in the context of devolution (see footnote 16). (18) MOCIE officially states in its document that it has promoted twenty-six regional biotechnology clusters outside the Seoul metropolitan area, on the basis of the number of projects that it has funded. Yet, some projects are pursued by the same organizations in the same location. Hence, there are fourteen physically visible regional biotechnology clusters, as shown in figure 2. (14) See

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Y-S Lee, Y-C Tee, D-w Kim

Table 3. The Ministry of Commerce, Industry, and Energy's twenty-six regional bioclusters (source: MOCIE, 2006). Cluster project

Main organization

Regional technology innovation centers (TICs)

Daejeon Biopharmaceuticals TIC

Korean Research Institute of Bioscience and Biotechnology Sangju National University Youngdong University Jeju National University

Industrial technical base creation centers

Chuncheon Bioventure Center Jeonju Bioventure Center

Regional specialization centers

Sangju Bioagriculture TIC Youngdong Biofoods TIC Functional Seasoning and Marine TIC

Naju Biotech Industrialization Center Jinju Bioventure Center Busan Marine Bio Center Daejeon Bioventure Town Ochang Health Support Center Jecheon Oriental Medicine Center Nonsan Animal Science Center Naju Biofoods Support Center Hwasun Bioagricultural Research and Development Center Jeju Bioscience Park Andong Biohealth Support Center Uljin Marine Bio Environment Center Chuncheon Biotown

Chuncheon Bio Industry Foundation Jeonbuk Bioindustry Development Institute DongShin University Bio 21 Center Shilla University Daejeon Hightech Industry Promotion Foundation Chungbuk Bioindustry Foundation Chungbuk Bioindustry Foundation Chungnam Animal Science Center Jeonnam Bioindustry Foundation Jeonnam Bioindustry Foundation Jeju Hightech Industry Development Institute Gyeongbuk Institute for Bioindustry Gyeongbuk Technopark Chuncheon Bio Industry Foundation

Second-stage regional specialization centers

Daegu Traditional Biomaterial Industry Center Daegu Oriental Medicine Support Center Jinju Bioventure Plaza Busan Marine Bio Industry Center

Daegu Technopark

Regional innovation centers

Jeonju Bio Park Infra

Jeonbuk Bioindustry Development Institute Jeonnam Bioindustry Foundation

Hwasun Vaccine Production

Daegu Technopark Bio 21 Center Busan Technopark

location and spread across South Korea, since the state utilized an indigenous regional development strategy in creating biotechnology clusters (figure 2). This decentralized cluster formation stands in contrast to the Singapore biomedical cluster, which is located in one highly concentrated region. In the South Korean regional biotechnology clusters the main players are local businesses targeted at local markets. 4.3 Evaluation

We have contrasted Singapore's exogenous approach and South Korea's endogenous approach to biotechnology cluster development. In Singapore the emphasis is on the importance of external global networks in biotechnology cluster development; in South Korea the emphasis is on building endogenous capabilities. Since both approaches

Biotechnology industry cluster policies in South Korea and Singapore

625

Chuncheon  Bioventure Center  Biotown Cheongwon  Ochang Health Support Center

Jecheon  Oriental Medicine Center

Daejeon  Bioventure Town

Uljin  Marine Bio Environmental Center

Nonsan  Animal Science Center

Andong

 Biohealth

Center

Jeonju  Bioventure Center  Bio Park Infra

Daegu

 Traditional

Biomaterial Industry Center  Oriental Medicine Support Center

Naju  Biotech Industrialization Center  Biofoods Support Center Jinju

Hwasun  Bioagriculture Research and Development Center  Vaccine Production Jeju  Bioscience Park

Support

 Bioventure

Center  Bioventure Plaza

0

50

Busan  Marine Bio Industry Center  Marine Bio Center

100 km

Figure 2. Regional biotechnology clusters in South Korea.

have their advantages and disadvantages, we will evaluate the strengths and limitations of both approaches for the standpoint of GPN. By relying mainly on foreign biomedical firms and foreign talent, Singapore has not only succeeded in laying the foundations (infrastructure, capital grants, workforce, and RSEs) needed to develop a biotechnology industry, but has also achieved rapid growth of the sector within a short period of time. The outstanding growth rate of biotechnology manufacturing outputö48.1% within three yearsöillustrates the rapid growth of the biomedical sector in Singapore (table 4). Compared with South Korea's output (S$ 4504 million), Singapore's manufacturing output (S$ 18 043 million) in the biotechnology sector was almost four times larger in 2005 (table 4). Although Singapore's exogenous strategy of relying on foreign biomedical firms contributed to generating prosperity, it has hampered the development of an indigenous biomedical industry. Local biomedical firms have been left out of the state's network due to excessive emphasis on attracting foreign firms and foreign talent.(19) Out of 172 biomedical firms in Singapore, only 68 are local firms, and even among the local firms GLCs make up the majority. Local private biomedical firms have faced significant difficulties in securing funding to start up and commercialize their products in the Singapore market; venture capitalists offer funding almost exclusively to foreign biomedical firms and GLCs. According to our survey results local private biomedical (19) To get an overall view of the relations between the state and biomedical firms (both foreign and local) in Singapore we conducted surveys using e-mail with 172 biomedical firms. In total, thirtytwo completed questionnaires were collected, with a response rate of 18.6% (twenty foreign and twelve local firms).

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Table 4. Profile of the Singapore and South Korea biotech sectors, 2003 ^ 06 (source: BAK, 2004; 2005; 2006; EDB, 2004; 2005; 2006). Year

2003 2004 2005 Growth (%)

Number of firms

Number employed

Singapore

South Korea

Singapore

605 640 668

8 642 9 393 10 200

10.4

18.0

na b na b 172

South Korea

Manufacturing output (S$ million) a Singapore

South Korea

11 013 11 761 13 867

12 184 16 432 18 043

3 038 3 574 4 504

23.7

48.1

48.2

Note: na ˆ not applicable. a We have converted current Korean won into current Singapore dollars using annual exchange rates for each year. b The data on the number of firms were collected from 2005.

firms have difficulties in recruiting experienced personnel (both production workers and RSEs). These difficulties are due to the state's exclusive support of foreign biomedical firms. Among foreign biomedical firms surveyed, 85% are highly networked with the state, as compared with 25% of local biomedical firms. On the contrary, 58.3% of local privately owned firms have low or very low network linkages with the state. Therefore, private biomedical entrepreneurship growth has been relatively slow to progress. The exogenous approach, which depends heavily on foreign talent, prevents the nurturing of local RSEs and local production workers. The Singapore biomedical sector chronically lacks biomedical personnel, a situation which could threaten the sustainable development of the biomedical cluster in the long run. Mr Chia, managing director of SinBio 3, said in an interview on 10 March 2006: ``The number of RSEs in Singapore is barely enough to support the biomedical industry. On top of that, most local graduates take on junior positions in research teams. If this persists, Singapore's biomedical industry may not be sustainable in the long run. After all, talent is the main driver of this industry.'' Overall, Singapore's exogenous approach has been criticized for fostering external linkages at the expense of internal institutional factors. The South Korean state's endogenous strategy successfully strengthened internal institutional foundations by developing biotechnology-related education programs in universities, creating regional biotechnology clusters, and nurturing local personnel. In particular a local pool of RSEs was effectively developed to support the South Korean biotechnology industry. South Korea has 7430 RSEs, a number which is more than double the 3356 RSEs in Singapore as of 2005 (A*STAR, 2005; BAK, 2006). Further, the RSEs in the South Korean biotechnology sector are all local personnel.(20) The state's strategy of highlighting endogenous factors also resulted in the proliferation of small businesses and venture firms in the biotechnology sector. As shown in table 4, the number of firms in the South Korean biotechnology sector is 668, almost four times the 172 firms in Singapore's biomedical sector. Despite the large number of firms and employees involved in the biotechnology sector, the achievements of the South Korean biotechnology sector are poor. The manufacturing output of the Korean biotechnology sector is almost four times smaller than that of Singapore. Moreover, in (20) Interview

with the President of the Bioindustry Association of Korea, 13 November 2006.

Biotechnology industry cluster policies in South Korea and Singapore

627

spite of the large number of biotechnology firms, the South Korean state's endogenous strategy was not successful in fostering global players among Korean biotech firms. (21) Moreover, although more regionally dispersed biotechnology clusters have evolved, they are not functionally specialized; they are largely homogeneous, focusing exclusively on biofoods based on local agricultural and marine products, and characterized by low-tech and low-value-added elements.(22) Consequently, South Korea's endogenous approach has not spurred biotechnology industry growth and globalization of economic activities, due to the focus on endogenous capabilities development in the regional biotech clusters. 5 Conclusion: theoretical and policy implications for multiscalar governance The evidence from the Singaporean and South Korean cases highlights the need to move away from the dualistic exogenism and endogenism debate to a dialectic GPN approach in cluster development. Through a comparative case study we have confirmed that the ways in which the state pursues cluster development depend on the institutional setting in specific countries. In the unified city state of Singapore öwhich has absolute political and economic power over other social groupsöthe state fully embraces the idea that foreign biomedical firms and foreign talent are major patterns in creating and operating within the biomedical cluster, which is centralized in a single location. The state's cluster policy is relatively more efficient and more coherent, and is carried out in a more strategic manner. In contrast, the South Korean state, which has undergone restructuring, has taken an endogenous approach to cluster development, which places more emphasis on nurturing local firms and local institutions. The biotechnology clusters created in the South Korean context are decentralized and are carried out in a relatively more complex, less coherent, and less strategic way. Although South Korean cluster policy is less coherent and less strategic, it might bear more fruit in the longer run if it successfully nurtures local firms and utilizes extralocal connections. Through the critical evaluation of cluster development in Singapore and South Korea, we have revealed the limitations of the dualistic exogenism versus endogenism approach to regional development policy. The Singapore wayöbased on exogenismö has failed to develop an indigenous entrepreneurial class and a pool of local skilled workers. Singapore's approach has come under serious criticism for being overly preoccupied with external linkages at the expense of internal institutional dynamics. The South Korean wayöbased on endogenismöhas failed to nurture global players due to its excessive focus on local transactions and institutions at the expense of extralocal connections. This evaluation suggests that we should adopt the GPN perspective in cluster development in an era of globalization. Highlighting the dynamic interactions between the strategic needs of translocal actors and localized growth factors, we suggest some insightful policy implications for both Singapore and South Korea. In the case of Singapore, the state should reconsider its exclusive targeting of foreign firms and GLCs. While the state has pursued R&D partnerships and joint ventures between foreign firms and GLCs, local private firms are excluded from these efforts. This state-driven exogenous strategy will continue to limit the growth of local entrepreneurship by hampering start-ups and spin-offs among local private firms. The state should work to develop a local pool of biomedical personnel to (21) Although Korea's LG Life Science developed and commercialized the Euvax-B vaccine, it exported this product only to developing countries such as Egypt. (22) Interview with a deputy director of the MOCIE, 20 November 2006.

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support the biomedical industry. This is crucial because the rapid growth of the biotechnology sector in Singapore is built on shaky ground unsupported by a domestic entrepreneurial class and domestic workforce. In the case of South Korea the state should pay immediate attention to coordinating local development policy with global resources. The state should develop diverse policy tools to attract and embed TNCs in order to boost growth and build more vibrant biotechnology regional clusters. For this, the state should utilize the Bio-Star Project more strategically in attracting and embedding foreign TNCs by boosting its budget and making it available to foreign TNCs. The state also should strongly encourage R&D partnerships and joint ventures between local firms and foreign TNCs. In sum, both Singapore and South Korea need to develop a more collaborative environment to foster closer ties between foreign and local biotechnology firms for the long-term growth of the industry in the two countries. Acknowledgements. This study was supported by a Korea University Grant and a National University of Singapore Academic Grant (R-109-000-061-112/133). We thank R J Bennett, editor of Environment and Planning C, and the two anonymous referees for their constructive feedback in developing this paper. References A*STAR, Agency for Science, Technology and Research, Singapore 2002, ``National survey of R&D in Singapore 2002'', http://www.a-star.edu.sg/uploads/ RD2002 V1.pdf 2005, ``National survey of R&D in Singapore 2005'', http://www.a-star.edu.sg/astar/front/ media/content uploads/SurveyBook2005.pdf 2006, ``National Survey of R&D in Singapore 2006'', http://www.a-star.edu.sg/astar/front/ media/content uploads/R&D Survey Booklets 2006.pdf Amin A, Thrift N, 1994 (Eds) Globalization, Institutions and Regional Development in Europe (Oxford University Press, Oxford) Asheim B T, 1996, ``Industrial districts as `learning regions': a condition for prosperity European Planning Studies 4 379 ^ 400 BAK, Bioindustry Association of Korea, Seoul, http://www.bak.or.kr 1997, ``Annual report on bioindustry in Korea'' (in Korean) 2004, ``Annual report on bioindustry in Korea'' (in Korean) 2005, ``Annual report on bioindustry in Korea'' (in Korean) 2006, ``Annual report on bioindustry in Korea'' (in Korean) Bathelt H, Malmberg A, Maskell P, 2004, ``Clusters and knowledge: a local buzz, global pipelines and the process of knowledge creation'' Progress in Human Geography 28 31 ^ 56 Benneworth P, Henry N, 2004, ``Where is the value added in the cluster approach? Hermeneutical theorizing, economic geography and clusters as a multiperspectival approach'' Urban Studies 41 1011 ^ 1023 Biomed Singapore, 2005, ``Singapore: the biopolis of Asia'', Biomed Singapore, http://www.biomed-singapore.com/bms/sg/en uk/index.html Breschi S, Lissoni F, 2001, ``Knowledge spillovers and local innovation systems: a critical survey'' Industrial and Corporate Change 10 975 ^ 1005 Bunnell T, Coe N, 2001,``Spaces and scales of innovation'' Progress in Human Geography 25 569 ^ 589 Chang H J, 2007,``Globalization, global standards, and the future of East Asia'', in Global Challenges and Local Responses: The East Asian Experience Ed. J S Shin (Routledge, London) pp 13 ^ 30 Chang H J, Park H J, Yoo C G, 1998, ``Interpreting the Korean crisis: financial liberalization, industrial policy and corporate governance'', in Financial Liberalization and the Asian Crisis Eds H J Chang, G Palma, D H Whittaker (Palgrave, London) pp 140 ^ 155 Coe N, 1997, ``US transnationals and the Irish software industry: assessing the nature, quality and stability of a new wave of foreign direct investment'' European Urban and Regional Studies 4 211 ^ 230 Coe N, Kelly P F, 2000, ``Distance and discourse in the local labour market: the case of Singapore'' Area 32 413 ^ 422

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