Protection and national systems of innovation: The take-off of the automobile industry in Argentina, Spain and South Korea, 1945-87 Jordi Catalan Universitat de Barcelona (*)

The experience of Saenara-Shinjin suggests that monopoly was harmful for the expansion of the industry, as the experience in Korea suggests. On the other hand, the sudden de-regulation of competition also created inefficiencies as occurred in Argentina with the Revolución Libertadora, and Frondizi’s and Videla’s governments.

Foreign licensing stimulated technology transfer, it was conducive to growth and it could favor creative imitation. Initially it was the main instrument of technological learning in the three countries under consideration. Successful national champions during the flourishing phases of the industry depended on foreign partners: IKA on Kaiser and Renault; SEAT on FIAT and Volkswagen; or HMC on Ford and Mitsubishi.

Foreign investment might contribute to the long term development of the sector, but this was not always the case. Because of large economies of scale in the industry, too many firms producing reduced series could jeopardize long-term expansion, as illustrated by the failures of IKA in the sixties and SEAT in the seventies. As a result, Argentina and Spain seriously reduced their capacity to promote technological learning and domestic R&D in the automobile industry , and their potential for creating a solid national system of innovation.

Support for a national champion could help to overcome technological dependence provided that the market preserved some degree of competition. The nationalist priorities of accelerating the industrial change and supporting the creation of indigenous technology s concern in favor of indigenous technology might succeed might contribute to the desired results, but for them to completely succeed it was important that domestic firms should not be fully controlled by foreign interests, and that the number of firms should be limited. This was the case in Korea with HMC throughout the seventies and eighties: The Korean government could even force rivals to temporarily withdraw from passenger car production.

The high volatility of macroeconomic demand management was extremely harmful for the development of the industry. Even though the Argentinian automobile industry had faced significant diseconomies of scale before 1973, it rose steadily in the ranking of world producers and exporters throughout the Golden Age. The complete collapse of the industry after this date was due mainly to the macroeconomic instability of the country caused by dramatic policy shocks under Isabel Perón’s government, the military juntas, and during the transition to democracy.

Industrial policy also experienced sudden shifts in Argentina during the late fifites and seventies, and Spain, during the early seventies, which abruptly reduced protection and encouraged the settlement of foreign rivals regardless of the previous patterns of specialization. As a result, both countries fostered overproduction and put at a disadvantage the companies with the greatest potential to to develop autonomous R&D. In contrast, the Republic of Korea always moved extremely cautiously and subordinated liberalization to national interests. South Korea’s industrial policy, far from being immobile, evolved steadily in spite of the changes of political regime and economic recessions. Long-term agreements between government and leading firms contributed to a positive interaction between the indigenous automobile industry and the Korean national system of innovation.

In a nutshell, the experience of Argentina, Spain and South Korea confirms that the success of late-comers in the automobile industry depended on the long-term adoption of policies which openly departed from free trade. The Republic of Korea had a remarkable success in developing its car industry and strengthening its national innovation system up to 1987. Spain also succeeded in expanding its industry but policy discontinuity during the seventies and eighties made it less autonomous to promote R&D in the long-run. The Argentinian industry, in spite of a promising beginning during the early Golden Age, sank completely after 1973 because of the tremendous volatility of its macroeconomic management and adoption of a too liberal industrial policy.

Amsden, Alice H. (1989), Asia’s Next Giant. South Korea and Late Industrialization, Oxford U.P.

Molineri, Giuliano (1999), Giorgetto Giugiaro & Fabrizio: Italdesign, Automobilia, Milano.