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ICT goods and services presents these countries with the possibility forrapid economic growth through leveraging their low-cost manufacturing advantageto capture a signiï¬cant share of global ICT

inthe use of new ICT (Kagami and Tsuji, 2001). Late-comers may be able to exploitnew ICT more efï¬ciently than the advanced countries for two reasons: ï¬rst, theymay be able to learn from the experience of the advanced countries without havingto pay the cost of initial learning and experimentation (the ‘fast follower’advantage); second, they may be able to ‘leapfrog’ into the latest generation of technologies, thus avoiding the ‘legacy’ problems of having too much asset-speciï¬c investments sunk into earlier generations of obsolete technologies (the‘leapfrogging’ advantage). The more ‘disruptive’ the new technological advances,the greater the new ‘attacker’s advantage’ can be in exploiting new technologiesversus the incumbents (Foster, 1986).Such opportunities for growth and catching-up, however, may be outweighed byconsiderable threats arising from their late-comer position. First, technologicallearning may require a long cumulative process of human capital developmentthrough incremental learning by doing. Consequently, new technologies cannot bediffused at a faster pace in the late-industrializing countries than in the advancedcountries because of the human capital bottleneck. Second, efï¬cient adoption of new ICT may pre-suppose the existence of business infrastructure not only in theform of ‘hard’ physical capital (computers, network infrastructures, etc.), but also‘soft’ social capital (relatively efï¬cient factor and product markets, well-func-tioning ï¬nancial and regulatory institutions, etc.). Thus, while it is possible for newindividual ï¬rms to overtake established industry leaders by being faster and morenimble in exploiting new, disruptive technological innovation, it is more difï¬cultfor an entire nation to leapfrog other nations technologically. Third, the late-comercountries may lack the ï¬nancial resources to invest in new technologies asaggressively as the advanced nations, with the result that the latter will reap greaterproductivity and innovation beneï¬ts from new technology than the former (Jalavaand Pohjola, 2002).Given that advanced countries are able to adopt and apply new ICT faster thanthe late-industrializing nations, they may be able to overcome their factor costdisadvantage compared to the late-industrializing countries, thus giving them theability to re-capture much of the ICT manufacturing activities that have migratedto the developing countries over the last 20 years.The question of whether existing inequalities in economic well-being acrossnations may be accentuated or attenuated by the ICT revolution ultimately rests on

Wong

Information Economics and Policy

14 (2002) 167

–

187

169

how these opportunities and threats are actually realized in practice. Will the rapidmarket growth and technological disruption opportunities created by the ICTrevolution generate sufï¬cient ‘digital dividends’ to the late-industrializing coun-tries? Or will the weight of cumulative advantages enable the more advancedcountries to better exploit the new technologies, leading to an increasing ‘digitaldivide’ between the more advanced and late-comer nations?This issue of ‘digital dividends’ versus ‘digital divide’ is particularly pertinentin the current debate on the economic development prospects of East Asia. Fromthe late 1960s to the mid-1990s, East Asia has generally beneï¬ted from being themanufacturing workhorse for the rapidly expanding global electronics industry, theprecursor of the recent ICT revolution. It may be argued that the high presence of ICT goods manufacturing is likely to spill over into a high rate of diffusion and

adoption of ICT in the rest of the economy. However, the recent Asian ï¬nancialcrisis in 1997–99 has instead highlighted the possibility of an opposite effect:excessive focus on manufacturing may lead to neglect and subsequent underde-velopment of the services industries, especially ï¬nancial services and otherknowledge-based services which are ICT intensive. Accordingly, many Asiangovernments, through excessive domestic regulations in general and possiblepolicy bias in favour of manufacturing in particular, may have deterred (or at leastnot encouraged) the widespread diffusion and adoption of ICT applications inmany service sectors of the economy. As a result, Asia will become increasinglyunable to compete in the new global ‘knowledge-based economy’ (KBE) wherethe sources of competitive advantage are high knowledge-intensity and fastadoption of new technological innovation, not low-cost manufacturing and otherfactor cost advantage (Jalava and Pohjola, 2002; OECD, 2000; Bosworth andTriplett, 2001). For example, Dedrick and Kraemer (1998) have argued that EastAsian countries—because of inadequate diffusion and adoption of advanced ICTin much of the non-manufacturing services sectors—have become trapped inlow-margin electronics manufacturing, and lack the ability to move into high-margin service sectors such as software development, innovative design and ITservices. Rather than being complementary, ICT production may divert resourcesaway from ICT diffusion activities.This paper attempts to throw light on the impact of the ICT revolution on Asianeconomic development by providing empirical evidence on three inter-relatedquestions: (i) to what extent have Asian countries as a group been laggard in theadoption of ICT when compared to non-Asian countries, despite having captured adisproportionately high share of global production of ICT goods? (ii) To the extentthat there is a gap between Asia and the advanced OECD countries in ICTdiffusion, has it widened over time? (iii) Within Asia, has the gap in ICT adoptionbetween the more advanced countries—Japan and the four Asian NIEs—and otherdeveloping countries of the continent widened? Based on the empirical evidence

See, for example, Wong (1998) for argument along this line in the case of Singapore.

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Abstract