3
However changing business environments in Guangdong such
as rising prices of raw materials, strict environment controls,
cancellation and reduction of tax refunds are forcing many
Hong Kong manufacturers, especially those in labor-intensive
and environmentally unfriendly industries such as leather
tanning, shoe making, textile and garment production to shut
down or relocate. In this context firms are compelled to develop
a firm survival strategy.
Prof. Sharif’s study finds that innovative strategies such as
R&D investment, higher technology use, patents etc. improve
firm’s survival chances. Analysis of the data from an innovation
survey of Hong Kong manufacturers in Guangdong reveals that
“low cost” and “being close to the market and customer” were
primary motivations for firms to engage in R&D or innovative
collaborations. Large exporting firms were more likely to
engage in R&D and innovative collaborations since the internal
financial and organizational capability of such firms allowed
them to undertake the heavy initial fixed investment required
for an innovation plan. Other studies in emerging markets also
consider the growth potential of the market to be a significant
predictor of innovation. Innovative firms preferred to collaborate
with knowledge warehouses such as universities and
consultants who were based in Hong Kong and hence enjoyed
the advantage of geographical proximity. Surprisingly, public
financial support from the concerned governments had no
impact on the tendency of these firms to innovate. Hence the
paper points towards focusing on building a regional integrated
innovative system wherein the strengths and capacities of the
industry and research organizations yield positive externalities.
“Nothing is permanent except change” a popular quote by
Heraclitus succinctly hints towards firms investing in techniques
and strategies to survive in a dynamic world. Schumpeter had
argued that innovation is critical in a firm’s survival plan helping
them to competitively tide over the threat of new technologies
and improving existing capacities. HKUST IEMS Faculty Associate
Naubahar Sharif’s recent study coauthored with Can Huang,
analyzed firm survey data collected by the Hong Kong firms that
engaged in R&D or innovative collaborations in China showed a
greater tendency of survival in Guangdong. Since most emerging
economies operate in dynamic environments and face similar
problems of firm survival, the paper highlights the importance of
forging links between industry and knowledge warehouses such
as universities and research institutions to enable a healthy flow of
learning and knowledge.
In 2011, Guangdong province accounted for 23.6% of the total FDI
directed to China with Hong Kong being the largest contributor.
In recent years, Hong Kong's investment in Guangdong has
been diversified from manufacturing to the service sector. Several
factors contributed to Guangdong becoming Hong Kong’s favorite
destination for investment such as favorable and flexible tax
policies. Although Guangdong enjoys geographical proximity to
Hong Kong, it is the ethnic ties (cultural and linguistic) that link
the two societies more closely together than with other provinces.
Guangdong and Hong Kong have enjoyed a symbiotic relationship:
while Hong Kong capitalizes on the availability of cheap and
abundant labor and land in Guangdong; Guangdong takes
advantage of Hong Kong’s information on trade and knowledge
about the global market demand.
IEMS LUNCHEON SEMINAR SERIES 2013
RESEARCH HIGHLIGHT:
"INNOVATE OR DIE: THE FATE & FUTURE OF HONG KONG-OWNED
PEARL RIVER DELTA (PRD) FACTORIES"
Naubahar Sharif and Can Huang, “Innovation Strategy, Firm Survival and Relocation:
The Case of Hong Kong-Owned Manufacturing in Guangdong Province, China.”
Research Policy 41, no.1 (2012): 69–78.
11.11
INNOVATION OR DIE: THE FATE AND FUTURE OF
HONG KONG-OWNED PEARL RIVER DELTA (PRD)
FACTORIES
Prof. Naubahar Sharif
Division of Social Science, HKUST
12.2
TALENT RECRUITMENT, REVERSE
MIGRATION AND TRANSNATIONAL
BRIDGES IN SOUTH KOREA AND CHINA
/
Prof. Joon Nak Choi
Department of Management, HKUST
Prof. David Zweig
Division of Social Science, HKUST
