Rally for indigenous brands: Shilling for votes or trying Schumpeterian catch-up?

Published 29.10.2015 02:11
Updated 29.10.2015 02:15

The Nov. 1 general elections are around the corner and national brand proposals in telecommunications, automobiles, air travel, defense and transportation infrastructure are marching out in front of our eyes.

Should we give a nice round of applause, try to pummel it to death or belittle it with facetious names? We should discerningly ask more and demand its completion. Here is why.

It is loud and clear that Turkey is circling around the so-called middle-income trap. This is a term to define a country that has grown strongly but gets stuck at a certain level due to lackluster production losing its edge.

Strategies to undo this require the re-harmonization of policy framework and hands on shock therapy. The former requires policy makers to have the ability to unite and the latter requires expertise in engineering and execution in the country.

From where did we get this recipe? Neither from the West nor south, it is from the Far East.

Asian economies, including those of China and Korea, have managed to move, or are moving beyond middle-income status. Several studies, including a famous book by Keun Lee, demonstrate that by just looking at patent analysis we can infer that the secret lies in innovative systems that promote investments in short-cycle technologies and thereby create a shock therapy to part the economic path from its existing trajectory.

Hence, South Korea's decision to move public research and development (R&D) to the private sector paid off in a decade, and by the time they came to the 1990s most of R&D was private. Private R&D brought subjective, agile and fast decision making and the government provided an outlook to focus on short-cycle technology such as digital. Samsung and LG's turnaround with the help of their operators, SK Telekom and KT, also turned around the image of their vehicle makes of Hyundai and Kia, as well as their airline, Korean Air. They are three to four decades behind Japan, which has had a stagnant economy for the past two decades. Japan was the first in Asia to modernize its economy with the Meiji Restoration in the latter half of the 19th century.

Specializing in short-cycle sectors implies that the economy does not remain long within its existing lines of business, but is always moving into new lines. With this, an agile mechanism can leapfrog the economy to new technologies due to having a lesser reliance on existing technologies.

In terms of policy reshuffling, policy makers as well as entrepreneurial environments will keep asking themselves what is next. This will be a keen look to the future to tap industries and businesses that are likely to emerge in the immediate future and to think carefully about how to tap into those that are emerging.

Prompt decision making and timely investment are of critical importance in short-cycle sectors. Let's remember the fact that in the 4G auction the government promptly increased local procurement to a level previously unseen. It can lead to a technology environment that may bring a global return in a shorter timeframe with a destructive Schumpeterian perspective and local market boosts.

The same scenario is not far for the national automobile that debuted in the bumbling global automotive industry. The original industry is inhibited since Detroit's fall, Toyota's recall and Volkswagen's mortification, and now it is taking umbrage at non-automotive tribes. Uber is pushing a different business plan loaded with cash, Tesla is bringing a flamboyant vehicle to back them, and on the other track Apple and Google are getting ready to invade. It is clear that the well-established no-country-for-young-men industry is chapped and our move may leak in.

All these efforts can be considered attempts at playing catch up. Catch up, coined in the 1960s to describe the narrowing of a country's gap in productivity and income to leading countries that paved the way to sustainable economic growth beyond the level of middle incomes.

From a citizen's perspective, we need prancing. Success is good, failures are innocent and shilling is avoidable, but all should covet trying.

*Associate professor in the College of Engineering, Koç University

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