economies, with only a limited number of firms from Taiwan (China) having broken into the top ranks of this business. The 1990s also saw a huge wave of investment in auto assembly and component supply plants in emerging markets, especially in China and elsewhere in East Asia. As in electronics, the major assemblers are increasingly outsourcing to a small number of component suppliers with global reach, typically advanced economy firms like Delphi, Visteon, Bosch, and Denso which take on increasing responsibility for design and supply of the major component modules going into an automobile, and which are able to co-locate near the assembler’s worldwide operations. Doner, Noble and Ravenhill (2004, 2006) observe that these assembler strategies are tending to raise barriers to entry for developing country firms aiming to enter the global auto parts industry.

According to these case studies, competitive pressures are raising the technological and scale thresholds required for East Asian firms to participate in global production networks. If in the past low production costs were an adequate entry ticket for participation, today the price of entry also includes more sophisticated learning, innovation and design capabilities.

# **_Technology Licensing and Disembodied Knowledge Flows_**

<mark>Firms can also purchase disembodied external knowledge through acquisition of patents, non-patented inventions, licenses, disclosures of know-how, trademarks, designs, patterns and other consultancy and technological services. Royalty payments abroad provide a rough</mark> **<mark>Exhibit 3</mark>** <mark>measure of this form of technology transfer.</mark> <mark>measure of this form of technology transfer. Exhibit 3 indicates that royalty payments abroad by East Asian economies are also generally much higher relative to other economies at similar income levels. Firms may also derive disembodied knowledge flows through technological spillovers, benefiting from open source information such as scientific, technical and industry journals, informal contacts and communications through networks of researchers and specialists, trade and</mark> industry associations, trade fairs.

<!-- Start of picture text --> Royalty Payments (% of GDP)<br>and Per Capita GDP (PPP)<br>1<br>Source: World Bank<br>0.9 World Development Thailand<br>Indicators. 134<br>0.8<br>developing and Malaysia<br>0.7 developed economies.<br>Korea<br>0.6<br>Philippines<br>0.5<br>Indonesia<br>0.4<br>China<br>0.3 Cambodia<br>Japan<br>0.2<br>0.1<br>0<br>3 3.5 4 4.5 5<br>Per Capita GDP (Log, PPP)<br>Royalty Payments (% GDP)<br><!-- End of picture text --> <mark>Telecom systems are also an important channel for the flow of disembodied knowledge, as well as for facilitating international trade and coordination of multinational investment activity. The importance of the ICT infrastructure for innovation and</mark> <mark>productivity growth is suggested in Wei-Kang Wong (2006). This study looks at the impact of various types of cross-border flows on productivity and growth, including trade, FDI and disembodied knowledge flows, the latter proxied by international telephone traffic. Interestingly, telephone traffic is found to have the most robust positive effect on productivity and income.</mark> 13