The Sources of Competitive Advantage in Exporting Green Energy Systems

Despite the rise of domestic firms as leading manufacturers of clean technology products, Korea and Taiwan were the lowest users of green energy in the developed world. However, in 2016 Taiwan took a decisive turn to scaling up the use of renewables while lessening the dependence on fossil fuels and nuclear energy, and Korea did the same the following year. These significant events raise an intriguing question: Why were these countries capable of embarking on their green energy transitions and with such urgency when they did? I argue that the intensification of competitive pressures in the global renewables sector created the conditions for these states to muster a developmental response via the expansion of domestic markets for renewables. These governments used this opportunity to accelerate the promotion of cutting-edge energy innovations, which would help create new sources of national techno-economic competitiveness. My overall argument is that developmental-cum-environmental states possess national competitive advantages for coping with a global shift to renewables. The findings have implications for the debate over the popular idea of ‘green growth’ and its effectiveness in theory and practice.

In the midst of intensifying global competition over green energy systems, Korean and Taiwanese companies are rapidly rising as serious exporters of smart microgrids. What explains the emergence of an East Asian presence in the global green energy sector? My core argument is that policymakers in Korea and Taiwan view smart microgrids strategically as a new developmental infrastructure, which will help position domestic firms onto a new competitive footing. I show that in Korea, this is taking place through the state’s leveraging of the nation’s innovation champions – globally leading chaebol or conglomerates and their networks of small and medium enterprise (SME) suppliers in the domestic market. In Taiwan, the state has leveraged government research institutes and their rich networks with internationally competitive SMEs and with large domestic firms. These efforts reflect the creation of a new form of public and private cooperation, which I refer to as ‘hybridized industrial ecosystems’. These institutional mutations in the green energy sector suggest that the state’s transformative capacity has been expanding, not shrinking as many recent writers on the developmental state conclude. Overall, the findings from this fresh new sector represents the unfolding of a new chapter of developmental thinking in East Asia.

As the debate over the effectiveness of developmental regimes continues unabated, in this paper I take one step back and aim to establish greater clarity in measuring the state’s capacity to promote industrial transformation. I argue that current measurements used by proponents of a ‘shrinking state’ view suffer from a methodological bias, which can be summed up in two aspects: (a) a reliance on zero-sum conceptions of state power and, (b) the equating of conflict within the state and between the state and business as a signs of state weakness. I show why a ‘governed interdependence’ (Weiss 1998) approach can help establish greater conceptual clarity over measurements of state capacity in the debate. GI is a dynamic concept, which can accommodate changing forms of state and industry collaborations (some in which the state leads, some in which business is delegated to lead). The concept also articulates institutional mechanisms to resolve the normality of political contests and conflict in the policymaking process. Therefore, I assert that governed interdependence is a theory of state capacity, which avoids the conceptual pitfalls of the shrinking state school and can help advance the debate. Adopting a Weissian view of state power opens up new possibilities of how states and firms, especially global corporations are forging new forms of interdependence. This approach appears more promising than maintaining an unfruitful preoccupation over policy leadership exhibited in the developmental state debate as it currently stands.