Run of the Red Queen: Government, Innovation, Globalization and Economic Growth in China – By Dan Breznitz and Michael Murphree

Authors


Run of the Red Queen: Government, Innovation, Globalization and Economic Growth in China . New Haven, CT : Yale University Press . xviii + 278 pages. ISBN 9780300152715 , $35.00 cloth . Dan Breznitz and Michael Murphree . 2011 .

The publication of Run of the Red Queen: Government, Innovation, Globalization and Economic Growth in China could not have come at a better time. Ever since China surpassed Japan as the world's second largest economy, the hype surrounding China's supposed technological prowess, from scholars and popular media alike, has become, it seems, conventional wisdom. With speculation that Chinese firms and the Chinese economy are pushing the cutting edge of alternative energy applications, life sciences research, and information technologies (ITs), it is assumed that China is a leading technological innovator, and if not now, then soon. Thankfully, Breznitz and Murphree's timely book suggests that such analyses and related prognostications are an exaggeration.

The authors' thesis in Run of the Red Queen is quite simple: Chinese firms are on the cutting edge of the technological frontier, but they are not pushing it. Alluding to Lewis Carroll's Through the Looking Glass and the character of the Red Queen, Breznitz and Murphree argue that “China shines by keeping its industrial-production and service industries in perfect tandem with the technological frontier. Like the Red Queen, it runs as fast as possible in order to remain at the cusp of the global technology frontier without actually advancing the frontier itself” (p. 3). Breznitz and Murphree contend that China should not look to become technological innovators; keeping up is lucrative in terms of sustainable economic growth and, as they point out, already plenty difficult to do.

Their study explodes what they see to be the “techno-fetishism of novelty” (p. 195), an “obsessive focus on novel-product innovation or new technologies” (p. 185), which results, they say, in misguided policies that “lust after innovation, believing it to be the key to resolving all economic-development issues” (p. 13). Run of the Red Queen takes on this technonationalist hype, particularly in the developing world, by demonstrating how tremendously high-risk growing a novelty centered knowledge economy can be and how much economic value—measured in terms of profits, employment, investment—can be accrued by not being world innovators. Focusing on the large IT sector in China, Breznitz and Murphree argue that Chinese IT firms are making products and providing services to sell to buyers who want them. They returned lower margins at first, to be sure, but over time, they have become indispensable players in the interdependent global economy. They have learned how to take advantage of what the authors correctly see to be an increasingly globalized and fragmented production chain, a global value chain that offers more and more entry points for astute, even if marginally innovative, firms. Competitive and successful firms, such as those analyzed so carefully in the book, need not push the IT technological frontier; rather, they need only be innovative enough to make things better, faster, more precisely, and of higher quality to sell to those buying technology's cutting edge. This is how China's industrial economy has grown over the past several decades and how, Breznitz and Murphree contend, it will continue to grow over the medium term.

Run of the Red Queen explains in chapter 2 how China's innovation economy in the IT sector has evolved along two interactive dimensions. The central government has pushed a high-technology research and development agenda and one that has centered on first-order technological innovation. Local governments, in response, have adapted in ways that reflect local conditions, the nature of center–local relations, existing industrial context, and so on. As Breznitz and Murphree explain, local adaptation has proceeded more flexibly, driven by “trial and error based experimentation” (p. 19). Local adaptation and center–local tensions have been shaped by what the authors call “structured uncertainty.” Weak central political economic institutions combined with ambiguous directives from the center have given local actors the leeway and flexibility to determine their own conceptions of the innovation economy and the policies with which to achieve growth in the IT sector. Local strategies have thus varied. In chapters 3 to 5, Breznitz and Murphree detail Beijing's emphasis on start-ups, Shanghai's continued reliance on large and often foreign firms and investments, and Shenzen's (and the Pearl River Delta region) manufacturing-based entrepreneurialism. The book also argues, however, that structured uncertainty and ambiguity have similarly incentivized firms in all localities to engage in lower risk, nearer term, and thus less innovative production activities. The empirical chapters of the book, in my mind, are unparalleled in terms of their detailed richness, technological sophistication, and empirical breadth. I would think that an engineer would enjoy reading these accounts of enterprise and technology development as much as a management expert or a political economist would. They are simply of that high quality.

The main thrust of Breznitz's and Murphree's explanation of China's evolving technology-based economy rests with the importance of local policy experimentation and a sort of entrepreneurial agency shared among firms and local officials. However, it is also clear, as one reads this extraordinarily well-researched book, that China's ability to accommodate so many sites for local experimentation is, in part, a function of China's scale advantages. I agree wholeheartedly with the authors when they say that China's experience has much to offer other late-developing economies, especially, as they point out, the recognition of the fragmented global production chain in high-tech sectors such as IT, and hence, the strategic imperatives of figuring out where firms and labs might enter the global economy. I think their message concerning innovating at the cutting edge rather than advancing it is a much-needed one, especially as I see so many economies drawn to the lure but very distant (or false) promises of novel innovation. I also agree that the China story concerning local experimentation and the processes of learning from both local successes and failures is very compelling in comparative terms. However, China is uniquely huge, a variable that I think Breznitz and Murphree slightly downplay. China enjoys not only the production-related advantages of economies of scale, but more importantly, the size with which to experiment across many different technology fields and domains, in many local sites, and with many different kinds of models. The fact of China's size increases the probability of local successes and absorbs the costs of failures.

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