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I am aware that these are three relevant points that could have provided new perspectives on the topic, however, doing justice to them would require too much time and space. Therefore, the author of this thesis chose not to address them.
Yet, an assessment of the relative impact of the market self-regulating mechanisms and government control over investment relocation, as well as the expansion of the research to other companies other than Foxconn, would be very relevant to include in future research.
1.5 Foxconn in the literature
Before moving on to the discussion of the heart of the paper, I believe the literature dealing with Foxconn deserves to be presented in detail, in order to understand how different scholars have approached the topic, and understand what is the added value of this work.
Foxconn Technology Group is the trading name of the Taiwanese multinational electronics manufacturing company Hon Hai Precision Industry Co., Ltd., headquartered in the Tucheng Industrial Park, Tucheng Dist., New Taipei City, Taiwan. Founded on February 20, 1974 (Foxconn Electronics Inc. 2013a) with an initial investment of US$7,500 (Foxconn Electronics Inc., 2013b), the company has grown in size and revenue - in 2014, it ranked 32nd among Fortune Global 500 (Fortune, 2014) - and has attracted academics’ attention. Despite its long history however, Foxconn remained unknown to the public for a long time, and it was only within the last few years that it has started to gain massive international attention.
Asian scholars started to show interest in Foxconn in the early 2000. In 2002 Zhang Xuyi published the book A Three Hundred Billion Legend: Terry Gou’s2 Honghai Empire (sanqianyi chuanqi: guotaiming de honghai diguo, 三千億傳奇：郭台銘的鴻 海 帝 國 ), which describes Guo’s personality, presents his most successful entrepreneurial strategies, and follows the first steps of Foxconn growth and international expansion.
As pointed out by Frost and Burnett (2007), the western media became aware of Foxconn only four years later when the article iPod city (Joseph, 2006, June 11) was published on the English newspaper Mail on Sunday. The editorial traces the journey
2 Guo Tai Ming (Guo Tai Ming 郭台銘) also known as Terry Gou, is the founder and chairman of Foxconn. For more information about Mr. Gou’s personal life refer to Balfour and Coulpan (2010, September 13).
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an iPod makes from R&D to production, and reveals the harsh working conditions in the Chinese factories where the devices were assembled.
Since the early 1990s academics and activists of the anti-sweatshop movement drew the attention to the awful working conditions in the Chinese plants where companies in the apparel industry, especially Nike, outsourced manufacturing. High-tech industries however remained out of the discussion. This lasted until 2004 when the Catholic Agency for Overseas Development (CAFOD, 2004) released a report that lifted the blanket of secrecy. The first lines of the report states:
Its products may embody the latest in high technology, but labour standards and conditions in computer manufacturing can be appallingly low. Many stages of computer production are carried out by low-skilled, low-paid workers - most of them women - in developing countries.
But unlike their counterparts in the clothing and footwear sector, computer companies have thus far escaped scrutiny on labour issues.
This and other similar works set the stage for the publication of the Mail on Sunday’s piece, and the development of the literature regarding Foxconn in general.
Given this background, if we add that between 2007 and 2013 around twenty workers committed suicide in one of the company’s plant in Shenzhen (Barboza, 2009, July 26) (Lau, 2010, December 15) (Mozur, 2012, December 19) (Yu, 2013, May 2), it is not surprising that most of the literature dealing with Foxconn gives attention to workers poor (by western standards) working conditions.
Besides the everyday media coverage, the topic came also into view in a large number of academic dissertations. Josephs (2014) uses Foxconn as case study to show how U.S. based multinational corporations, outsource production to Chinese companies that violate the Chinese workplace law and the international labor standards. The Students and Scholars Against Corporate Misbehavior revealed the actual working and living conditions of workers at Foxconn (SACOM, 2010, October) and showed how workers are generating huge revenues for Foxconn while the company does not comply with the labour laws or the code of conduct (SACOM, 2011, September).
Similarly Lucas, Kang and Li (2013) made an analysis of workplace dignity using Foxconn as a proxy, and distinguished between an appropriate strategy for profit maximization and regimentation, under which workers’ dignity and well being are of no concern.
Other scholars concentrated on student interns (Su, 2010) and trade unions (Rulliat, 2010) (SACOM, 2010) (Good Electronics, 2013).
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Arguably are Ngai and Chan, the two authors who provide the most in-depth and wide ranging analysis of Foxconn worker’s condition. They trace the corporate growth of Foxconn in China (2012) and describe Foxconn workers’ condition, suicides and student interns as manifestations of two features of the modern Chinese Economy.
The first one is the state-promoted development model that sacrifices dignity for corporate profit in the name of economic growth; the second one is the global production chains of the consumer electronics that aiming constantly at reducing costs and maximize profits, is the source of the pressure placed on Chinese workers (2010) (2012) (2013).
Besides this literature, as Foxconn became widely known by people outside the industry, a growing number of scholars started scrutinizing the company from a business point of view; most of these studies however have a too tight or too wide focus. Concentrating on single investments, or including them in the broader discussion of the MNCs, researchers do not provide an understanding of the so-called Foxconn experience as a whole.
Chiang and Yan (2015) use the case study of Foxconn to present the concept of entrepreneurship and illustrate how business initiative changes in the three stages of company formation, growth and transformation into global corporation.
Other works address the most recent developments, such as the investments in building electric cars (Kan, 2014, September 4) or the introduction of industrial robots as a way to save money on labor (Kan, 2013, July 26; 2015, February 27) (Larson, 2012, July 16) and limit the labor shortage problem reducing dependence on permanent employees (Qiao, 2013).
A smaller number of scholars, as already said, looked at Foxconn’s investments with a wider focus, recognizing that its industrial development had many similarities with that of other Taiwanese companies that invested in China. Among these Chen (2011) analyzed cross-strait investment possibilities before and after signing the ECFA agreement.
Others instead, traced the investment pattern of Foxconn and other Taiwanese companies, showing how their outward FDI were the main driver of the economic growth of Kunshan (Chen, 2008) (Chen, Melachroinos, and Chang, 2010) and Chongqing (Huang 2011).
Still others looked at Foxconn investment diversion and Industrial Relocation.
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Yang explored the redistribution of Taiwanese IT investment from the PRD to the YRD, and starting from the concept of open region, discloses the exogenous factors that together with national state and local initiatives, explain the PRD-YRD regional development and inter-regional competition for the in-flows investment (2009). Later In 2013 Yang further addressed this topic looking at the emerging inland factory relocation/expansion, which he explains as a strategy that TNCs use to rebalance between exports and domestic sales. Asei (2014) in a similar study of the inland relocation, focused on the two dynamics of agglomeration and dispersion.
To summarize we can say that Foxconn has been widely discussed in many academic research papers, and that most of them have a sociological slant rather than economical. Influenced by the high rate of suicides that afflicted plants in Mainland China, scholars focused the most on the labor condition of Foxconn workers, pushing the company’s very interesting business expansion, diversion and relocation into the background. Even though some academics addressed these aspects, their focus was too tight or too broad with the consequence that the available literature falls short of a coherent description of Foxconn geographical and product expansion. Bridging this gap is the very goal of this paper.
In order to do that, I need to momentarily shift the focus away from Foxconn towards the greater Asia Pacific Region. After all Foxconn’s investment into Mainland China can be considered as subset of the Taiwanese investments, which in turn are included in the wider group of investments flowing towards China from the Asian Tigers. Further including Japan into our discussion about the allocation of foreign direct investment in the region, we enter into the widely known subject of the Asia Pacific regional development. Resorting to the Flying Geese model, which provides one of the best explanations of the process of East Asia regionalization3, we can trace the path that FDI have followed in their consecutive relocation from Japan towards NIEs, South East Asia and recently China.
Next section is dedicated to the analysis of the Flying Geese Model.
3 In IR, regionalization refers to “non–state-driven—usually market-driven—processes of integration”
(Kim, 2004) that therefore “develops from the bottom up through societally driven processes coming from markets, private trade, and investment flows, none of which is strictly controlled by governments.”
(Hoshiro, 2012).
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2 FLYING GEESE PATTERN OF ECONOMIC DEVELOPMENT
The flying geese paradigm is a doctrine of industrial development in latecomer economies of Japanese Origin. The model was originally developed in the early 1930s by the Japanese economist Akamatsu Kaname4 (1896-1974), but after his death, it has been further rehashed by numerous scholars who, in different times, revisited and extended one or more parts.
This section, addressing only some key aspects of the FGM, should be regarded as an introduction to the model, where the Akamatsu’s original formulation is updated with few key concepts by Kojima and Ozawa, the Japanese economists who, according to the author, brought the most valuable contribution to the original formulation adapting it to the latest developments of the world economy. This chapter neither tries to be an overarching presentation of all the different formulations5, nor claims to assess the empirical validity of the model.