National champions or global partners? Explaining firm responses to industrial policy in China’s nuclear and wind sectors

Abstract

State-industry coordination has been regarded as fundamental to effective policy intervention, but the fact is that the state sometimes meets resistance from certain industrial sectors in the efforts of building national industries. So why are firms in some industrial sectors cooperative with the state but those in other sectors unresponsive to state directions? While studies have shown that the pursuit of economic competitiveness and national security accounts for the techno-nationalist orientation of a state, few explain the distinct firm responses to state directions across sectors. In order to understand the sectoral variation in firm behavior, this thesis develops a theoretical framework based on industry characteristics and examines manufacturing industries in two categories, complex product systems (CoPS) and mass-production. It proposes that the distinct natures of the sectors are associated with different domestic-foreign business relationships, which tend to lead to distinct firm responses to state policy in these sectors. Looking into China’s nuclear and wind power sectors, respectively representing CoPS and mass-manufacturing, the research finds different outcomes despite Beijing’s commitment to a nationalist agenda in both sectors. Indigenous Chinese firms in nuclear power established long-standing strategic business relationships with international vendors and were unresponsive to the national policy of reducing foreign technology dependence, whereas those in wind power were supportive of Beijing’s nationalist policies because of the rivalry with leading global producers. Through theoretical and empirical studies, this thesis generates conclusions that are relevant to other political economies and can be applied to other industry sectors.