Institutions as a Cause of Upgrading: The Case of the Chinese Rubber Industry Open Access

Pesce, Matthew Domenic (2014)

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It has become clear that sizable variation exists in the ability of countries and industries to successfully facilitate upgrading. One causal mechanism that may explain this variation is the presence of state, quasi-state, hybrid, and private institutions. This paper argues that high levels of upgrading in the Chinese rubber industry are unlikely to exist in the absence of institutions. Furthermore, it contends that not all institutions are equal in terms of their ability to induce upgrading. Instead, the effect of institutions is conditioned on the presence of particular features that are only sometimes present. Moreover, the paper argues that the creation and evolution of institutions can help explain their level of effectiveness. It contends segments of the Chinese rubber industry that have greater national security importance, give China a technological advantage, and are integral to economic growth should possess institutions.

A qualitative research methodology is adopted to evaluate this theory. Three institutions, representing different segments of the rubber value chain, are compared and contrasted to assess their creation, evolution, and ability to facilitate upgrading. Thus, sub-sectorial variation between cases is used for comparative purposes. The paper draws on original data collected through interviews at a China rubber industry trade conference as well as existing historical accounts of the development of the industry. The evidence collectively suggests that institutions are often important determinates of upgrading. It also supports the contention that institutions are frequently created as a result of political concerns relating to security, technology, and growth.

Table of Contents

Background 1
Literature on Upgrading 3
Literature on Value Chains 6
Literature on Institutions 9
Literature on China 11
Hypotheses 15
Research Design 16
Primer on Chinese Rubber 18

Upstream Upgrading 21
Mechanics of Cultivation 26
History of Cultivation 27
History of State Farms 28
Functions of State Farms 34
Evaluating State Farms 37
Other Institutions 41

Downstream Upgrading 43
Mechanics of Processing 49
Mechanics of Tire Production 49
History of Production 50
History of Qingdao University 52
Functions of Qingdao University 55
Evaluating Qingdao University 58
History of Rubber Valley 61
Functions of Rubber Valley 65
Evaluating Rubber Valley 69
Other Institutions 72

Findings 74
Limitations 75
Future Research 76

Appendix - Trip Timeline 79
Appendix - Tables & Charts 80

Works Cited
Bibliography 81

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