In the past 35 years, China, Hong Kong, Korea, Singapore, and Taiwan (China) have transformed themselves from technologically backwards and poor economies to relatively modern, affluent economies. Each has experienced more than a fourfold increase in per capita income. In each, a significant number of firms are producing technologically complex products competitive with firms in Europe, Japan, and the United States. Their growth performance has exceeded that of virtually all comparable economies. How they did it is a question of great importance. Virtually all theories about how they did it placed investments in capital stock at the center of the explanation. The authors divide most growth theories about the Asian miracle into two groups: 1) The"accumulation"theories stress the role of capital investments in moving these economies along their production functions. What lies behind rapid development, according to this type of theory, is very high investment rates. If a nation makes the investments, marshals the resources, development will follow. 2) The"assimilation"theories stress the entrepreneurship, innovation, and learning these economies went through before they could master the new technologies they were adopting from more advanced industrial nations. They see investment in human and physical capital as an essential but far from sufficient part of assimilation. In addition, people must learn about, take the risk of operating, and come to master technologies and other practices new to the country, if not the world. The emphasis for assimilation theorists is on innovation and learning, rather than on marshaling. If one marshals but does not innovate and learn, development does not follow. These are complex theories that raise as many questions as they answer. The authors discuss differences in the way the two groups of theorists treat four matters: entrepreneurial decisionmaking; the nature of technology; the economic capabilities possible with a well-educated work force; and the role exports play in a country's rapid development.The differences between the theories matter because they affect our understanding of why the Asian miracle happened and because they imply different things about appropriate economic development policy.
