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Learning and growing in organized markets: A commodity chain perspective of petrochemical development in Taiwan

Balaguer, Antonio (2000) Learning and growing in organized markets: A commodity chain perspective of petrochemical development in Taiwan. PhD thesis, Murdoch University.

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This thesis focuses on the factors that have contributed to large-scale petrochemical development in a small market without petroleum resources such as Taiwan. The thesis challenges the conception of petrochemicals as a by-product of the oil and gas industry. On the contrary, it conceptualizes petrochemicals as a supplier industry for downstream sectors, or more specifically ‘commodity chains.’ Gereffi’s concept of the Global Commodity Chain is used as a basic framework for understanding how markets are organized and for identifying the factors shaping demand for petrochemical materials. The thesis relies extensively on innovation theory literature and the concept of user-producer relationships as a way of explaining the processes of learning and industrial upgrading which are important explanatory variables of the growth of Taiwanese petrochemicals.

Taiwan has developed an impressive and diversified US $22 billion petrochemical industry and is a world leader of products such as PVC, ABS and polyester fibers. The thesis asks: How was Taiwan -a developing country with a small market and without petroleum resources- able to develop a large and diversified petrochemical industry? It does so through a combination of historical study of the post-war development of the industry, analysis of industry statistics (including input-output data) and two detailed case studies of Taiwan’s largest petrochemical groups, Formosa Plastics Group and Chi Mei.

The thesis suggests that Taiwanese petrochemicals’ success as a supplier of synthetic materials for labor-intensive commodity chains such as apparel, footwear and toys has been made possible by the opportunities that a highly export-oriented economy generated and the specialization of Taiwanese petrochemical groups as large scale manufacturers of petrochemicals and semi finished synthetic materials. The progressive upgrading of Taiwan’s manufacturing sector led by electronics and the emergence of manufacturing networks in mainland China and East Asia since the early 1980s have produced a key “demand-push” effect that not only stimulated demand for petrochemicals materials, but also shaped the mechanisms of learning.

The thesis, however, finds that as petrochemical suppliers aim to enter in highly sophisticated commodity chains such as advanced electronic components, success is more dependent on firms’ own technological capabilities and less on the opportunities that a dynamic environment can offer. Some of the weaknesses of Taiwan’s innovation system, such as low R&D spending, seem to be emerging as important barriers to moving into even higher value-added commodity chains.

Finally, from a theoretical perspective, the thesis tries to integrate the literature on commodity chains and on innovation, while recognizing the importance of the sectoral specificity of the chemical industry. In this way the thesis aims to contribute to the understanding of processes of development in latecomer firms, industries and countries.

Item Type: Thesis (PhD)
Murdoch Affiliation(s): Division of Social Sciences, Humanities and Education
Notes: Note to the author: If you would like to make your thesis openly available on Murdoch University Library's Research Repository, please contact: Thank you.
Supervisor(s): Phillimore, John
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