COMPLEXITY AND INTERNATIONALISATION OF INNOVATION — WHY IS CHIP DESIGN MOVING TO ASIA?

Among Keith Pavitt's many contributions to the study of innovation is the proposition that physical proximity is advantageous for innovative activities that involve highly complex technological knowledge. But chip design, a process that creates the greatest value in the electronics industry and that requires highly complex knowledge, is experiencing a massive dispersion to leading Asian electronics exporting countries. To explain why chip design is moving to Asia, the paper draws on interviews with 60 companies and 15 research institutions that are doing leading-edge chip design in Asia.I demonstrate that "pull" and "policy" factors explain what attracts design to particular locations. But to get to the root causes that shift the balance in favour of geographical decentralisation, I examine "push" factors, i.e., changes in design methodology ("system-on-chip design") and organisation ("vertical specialisation" within global design networks). The resultant increase in knowledge mobility explains why chip design — which in Pavitt's framework is not supposed to move — is moving from the traditional centres to a few new specialised design clusters in Asia.