This article is Summary (not an academic style review) of book authored by Dan Breznitz titled Innovation and the State : Political Choices and Strategies for Growth in Israel, Taiwan, and Ireland. This book mainly discussed about how state directed the strategies of growth in three different countries in apart region, Israel, Taiwan and Ireland. As Breznitz stated that these countries offer cases of successful rapid innovation-based industrial growth in the time span of one generation in countries with very different political and institutional systems. Please quote respectively.
Organization of the Book
Breznitz organized his works into five different chapters, that is chapter 1 for Introduction, chapter 2, 3, and 4 differently discussed about Israel, Taiwan and Ireland and the last chapter, 5, is a conclusion of all. This chapters clearly divided the case of Israel, Taiwan and Ireland with his observations and research. Using extensive literature research, field research with interviews to the government key figure of such policies and elaborate, also nicely put in one chapter per one country, every advantages and disadvantages of such policies to have a lesson-learned from these three countries. This peripheral countries were relatively underdeveloped until the 1980s, but shifting paradigm changed their policies and turn to another “choice” of development which is strengthening the role of the state to create a decent climate to make the business prosperous through some set of regulations and system of innovation.
First Chapter
In the first chapter, he puts his view on (public) choice, and as the title of this book, he tell a perspective of political choices and strategies of three different states in different region with a differently ways of doing development but in a same form of action, led by state with its innovation system. Arguably, he underlined that politics is about crafting and picking alternatives and it is matters if political choice for development is made and making it real for the development. Every alternative has its own consequences. Breznitz stressed that He still believe in every political choices of economic development in every social, environmental, liberal, conservatism, even neoclassical economics that only believe of the only choice is to let the market rule, and correct the failure of the system itself, and the developmental statists, who argue that the only specific structures of states bring forth industrial success.
Nonetheless He argue that in every choices above, the states and the societies, through the political process of crafting and picking alternative modes of action, can follow diverse path and still achieve the industrial success. In this case, every alternative one country follow, it is a choice of alternatives and the choice will be results in a failure or successful program of development. Three countries have been chosen by Breznitz to illustrate his messages. On the last page of the first chapter, before begin to elaborate these three countries, Breznitz informed the readers that he has three goals for this book. “The first is to expand our understanding of the role, and the limits, of the state in the development of rapid innovation-based industries in less-developed economies.
The second is to explain how the different approaches taken by Israel, Ireland, and Taiwan shaped the IT industries, influenced the particular development path of and the particular capabilities developed by each industry, and moved each industry into a different position in the IT’ industry’s global production network. Lastly, by showing that emerging countries have real alternatives with regard to RIB industrial growth, I argue that politics and the political struggles of crafting and choosing between these alternatives, as well as the politics of state-industry co-evolution, are important not only in explaining the difference between success and failure but in identifying the reasons behind the diverse paths of success. By shifting our explanations from timing and structure reasoning, I aim to show that both “state” and “politics” need to be explained if we want to understand both policy formulation and its outcomes.” (Breznitz, 2007, p. 40). Here we go, with Breznitz goals through review of his book.
Second Chapter : Israel
Israel is a nation country that built from ideological perspectives of the promised land. Differently from its Arabic countries counterparts, this country established shortly after the World War and have to defense itself against external forces as consequences of land grabbed for establishing this country. This condition thus makes the country facing a set of political economy cultural problems. From that condition, it Is reasonable that the choice of economic development based heavily on technology production based and for military purposes. Sometimes, commercial products basically comes from military innovation system. Infrared (dark-view) google, surveillance camera, underwater equipment innovation, is a R&D product for military purposes and then accepted as a commercial products to the wider market. The Israel human resources that scattered but brilliantly gathered, produced set of human capacity to build the innovation and development policies working and some firms become eminent especially in military and defense sectors. The relations between R&D and IT is very closed and it is not surprising that years to come, with its strong science-and-research infrastructure, Israel IT Industry rapidly advanced.
As a every minutes threaten by external forces and also to maintain their land and superiority forces over the local Palestinian (Gaza strip and West bank) resistance people, they have no other choice other than strengthening the R&D in technology. Thus, the industrial policy of Israel state is an IT minded and they become a IT industry leaders ahead, gradually and consistently up until now. Israel choice, according Breznitz, resembled of the “old” developmental-state theories for the first two decades of its existence. The state employed long-term planning and directly intervened in the creation of specific sectors and industries, especially textiles and defense. The interesting fact that, write Breznitz in page 42, Chapter 2, that Israel R&D and its foundational creation of high-tech industries is based on public research solely. R&D activities in the private civilian industries were almost unheard of. It means that the state itself has a determined factor to create the innovation and development.
What are the factors of Israel successful development of IT industries? Breznitz puts three factors that is First, R&D capabilities as Israel’s main competitive advantage from the beginning. R&D in existing defense sector and academic research system are very helpful for Israel to strive. The state focus on the enhancement of technological R&D so that the firms, easily to adapt and to gain benefit by developing novel products based on the latest technologies. Second, the state also focused solely on developing capabilities to create new R&D based products and saw themselves as the “grantor” of capital for R&D activities. Firms become agents of R&D of Israel. Third, government of Israel forcefully advanced a specific division of labor between local firms and Multi National Companies (MNC). This MNC (American, later on European or Japanese MNC) has become marketing channel of Israeli firms. On Israel case, Breznitz tell a story about Israel background history and its economic backwardness and move to an establishment of R&D institutions as OCS and BIRD. On the second section, he elaborated the rise of the new industry as evolution in the 1980s and early 1990s with a trigger of multiple economic crises in the 1973 after war occurred. As Israel after that growing its hardware sector first and then the software sector (Amdocs, mercury Interactive, Checkpoint, Formula Systems, Verinet etc.).
In this chapter, Breznitz also put the advantages and disadvantages of Israel models of development. The intimate relations of Israel with United States also become a disadvantages as double sided coin. The pull of American market on Israel made the Israeli market becoming less important, and more Israeli firms and companies feel the need to become as American as they can. To say the least, dependence to US market. Second, limited ability of firms to achieve sustained growth. Because Israeli firms imitating American model without having the American infrastructure and MNCS (Breznitz, p. 96). This is why, Breznitz insist that the Israeli IT industry more vulnerable than the industries of Ireland and Taiwan.
Third Chapter : Taiwan
Next chapter, is Taiwan case. One of the East Asian Industrialized Countries (NIC), Taiwan is country that in pioneered the model of the pure integrated circuit (IC) and semiconductor as their “choice” if high-tech industries. Breznitz argue that Taiwanese approach to Science and Technology industrial policy was through the state, acting as the technology-creating agent, embedding it within its structured, that spurred the growth of the IT sector. These policy carried by the establishment of two public research institutions (ITRI and III) whose responsible for making the decisions on what R&D to conduct and also implementing and executing the decisions directly.
Breznitz concluded that the successful of Taiwan hardware industries because of co-evolution between Taiwan R&D institution, Industrial Technology Research Institution (ITRI) and the private hardware industry. On the opposite, the failure of Taiwan software industry because the failure of co-evolution managed by the other Taiwan R&D institution, Institute of Information Industry (III) and the software industry. Second, he concluded that the institutional system of Taiwan with strong division of labor between industry and public research institution limits the firms to R&D and encourage them to go focus on development, not research. Third, local supplier network of MNC’.
The same as chapter about Israel, in this chapter, after having concluded, Breznitz then elaborated from historical background of the country in IT industry and also the history where in 1960s the world’s semiconductor industry going global and Taiwan seek to change their opportunities ahead. But after a while trapped into the FDI scheme and debt, Taiwan then change the policies in 1970s starting to established ITRI from merging three governmental labs.
In Taiwan, government promoted high-tech industry in several fronts, including fiscal policy, the creation of science park, and the pro-active investments of public R&D institutes, some of which assumed multiple roles. Breznitz then analyze models of Taiwanese hardware industry (Semiconductor and IC) and also Taiwanese software industry that “failed”, on the next section of this chapter. He add also sections about “government actions, institutions, and market structure in the divergent growth of the IT hardware and software sectors in Taiwan” and clearly believed that Taiwan state has opted to deeply intervene in the IT industry development path by encompassing the R&D creating agent within bureaucratic structure.
Taiwan bureaucracy in Breznitz view has been an almost ideal type of “Asian Weberian-Technocrat model”. But unlike in both Israel and Ireland, the labor and intellectual capital of development agency in Taiwan are heterogeneous, almost all has various engineering disciplines. However, in Taiwan case, deep penetration and policy implementation of R&D by state also has some weaknesses that is such a system are rooted in the same features, there are no incentives for private companies to develop their own sophisticated R&D, and the grants for private firm to conduct R&D are limited. So that companies in Taiwan only specialize in final product development and integrated design (Breznitz, p. 145)
Fourth Chapter : Ireland
Ireland is a country that even more “peripheral”. Different from Israel and Taiwan with its turmoil land and rainbow of problems of international politics, this country peripheral and backward to its developed neighbor, which is United Kingdom (UK). Different from Israel and Taiwan, Breznitz argue that Ireland evolved within a political system in which the state has ad one goal, job creation. The focus of job creation than Ireland develop an FDI-based industrialization within the framework of “neoliberal” politics, the usual nature of Anglo-American countries but with a “interventionalism”.
Within this view, state, then, did not apply pressure on the MNCs to embed with the local industry. The Industrial Development Agency (IDA)is the autonomous governmental agency, created specifically by the state to open manufacturing plants in Ireland and on upgrading the physical and educational infrastructure. The goal of employment rate (job creation) is always what IDA and its successors, Forfas, IDA Ireland, and Forbairt/Entreprise Ireland do. They are not thinking about development as a task creating rapid innovation based industry. The policy focus solely on software, only because EU funds availability in 1990s led to creation of subunit in IDA, the National Software Directorate, whose employees were recruited from industry. The other is still the same, not paying much attention to how rapid innovation through means of the successful and big—massive IT industry.
From its historical background, in the beginning of this chapter, Breznitz continue to move to discuss about how Ireland building their human infrastructure and buildup of the Irish Education System. In this section, Investment in Education, as one of main policies of the Irish state with the role of IDA is elaborated. The trajectories of Irish development policies than continue to the establishment of Science Foundation Ireland (SFI) and the Programme for Research in Third-Level Institutions (PRTLI) in 1998. After that, Breznitz tells stories about how Ireland growing their software companies with “help” of IDA. One of it is the injection of capital and creation of Enterprise Development Program (EDP) to increase employment, lower Ireland’s reliance on FDI by growing indigenous companies, create a set of suppliers to attract more MNCs, and change the attitude against entrepreneurship and local enterprises in Ireland. The focus was on all sectors, both traditional and technological (Bretnitz, 2007, p. 165)
Breznitz historically put the trajectories of IT development of Ireland into sections of “seeds of the IT industry” that is from 1960s to the Early 1980s, State policies and the Discovery of IT and Tradable Services in 1980s and 1990s. Then he discussed about the rise of software sector and the hardware sector that “continued stagnation” in the 1990s. According to Breznitz, The Venture Capital (VC) become a financial tools for Ireland, same as Taiwan in this case. For Israel, VC scheme not only for the pool of finance but also the pool of financiers. At last, the same as two countries before, this chapter also provide Breznitz view about the strengths and weaknesses of such policies and such development. Much to say, one of the main conclusion of Breznitz view about Irish state-driven policies are a job creation focus, vastly improving the educational, physical, and communication infrastructures, other than rapid innovation of IT industry at the first decade of IDA, bringing foreign companies to open manufacturing facilities within its borders. Yet to being sustainable, the Irish state focused as much as it was on FDI, and it is only affect to software sector but hardware sector still in stagnation.
Fifth Chapter : Conclusion
In the conclusion chapter, Breznitz came back to us about what he meant of the choice of the state and the consequences. He answer his own puzzles about the role of the state in the development of rapid innovation-based industries in less developed economies and does the IT industry’s very different development path suggest that multiple developmental choices are available for emerging economies. First, the state needs engagement, second, the state must action, third, the state must actively link local industry with global markets, fourth, the state and the industry need to be able to manage constant change. He also remind us about theoretical framework he built for the case, and from the lesson of three countries, he put a section in conclusion about politics of MNC—focused policies, facilitating industrial R&D, as politics of the state as a “researcher”. Brilliantly compare those empirical analysis, Breznitz closed the book with “the most important conclusion” that I should quote here; that states have a real choices with regard to developing their own rapid innovation—based industries. He also put lesson-learned from the cases, from summarizes to a conclusion and recommendation to draw.
Overall
“There is no ivory that is not cracked.” As a critics, this book has it limitation precisely because its strengths in elaborated all of aspects from the historical aspects of the three states. Breznitz trying so hard to spell out “the innovation” and “the state” that he could not managed to break down the political choice and strategies of the state to growth –with innovation, straight-forwardly. It took pages to introduce the Israel, Taiwan and Ireland background and how they did the transformation with such policies. The lengthy –although it is necessary, made this book as exhausted to read. But, trying to avoid that, He divided with some kind of sub chapter and sections with title, to make it easier to read and to find what is the main idea of that sections. Other critical remarks is about the
As we expect about the growth strategies being unfolded and elaborated nicely in this book, we’ve seen some how Dan Breznitz managed to amaze readers about his view of these three countries development choice and implementation within government initiate for innovation policies. He also stated clearly what he want to achieve upon writing the book, and what are according to him as the strengths and weaknesses of such particular countries. He also gave us facts about comparative policy by “comparing choices and consequences in rapid innovation based industrialization”.
As the final chapter, the conclusion of that comparison, a fruitfully and straight-forwardly insights of the case of three countries is there to conclude the experiences of Israel, Taiwan and Ireland, and thus for the readers, to think about whether what Dan Breznitz goals as he wrote it in the first chapter, is achieved or not. Breznitz book open our eyes that the political choice of innovation and IT industry as strategy, nicely –if we cannot say it perfectly, shown by these three countries, who one become a “backward countries” and now, borrowing Alice H. Amsden (2001) term in her book, “The Rise of The Rest : Challenges to the west from late-industrializing economies ”, from “sinking behind”, then “sneaking ahead”, and at last “squaring off”.
