In this well-researched book, Douglas Fuller engages in three debates. From the perspective of China studies, Paper Tigers, Hidden Dragons sets out to explain China's path of development in the face of weak domestic market institutions and the future prospects of China's direction. Theoretically, advancing beyond the state vs. market debate on the political economy of development and the literature on comparative institutions, Fuller contends that globalization could be an alternative, and he specifies the conditions under which foreign institutions could be conducive to China's technological development.

Fuller forcefully argues that post-socialist transformation could benefit from globalization in situations in which specific kinds of foreign entrepreneurship, namely, the ethnic Chinese foreign-invested enterprises he terms “hybrids,” opt for China-based operational strategies and import foreign financial institutions, sowing seeds in China's technological development, as demonstrated in the information technology (IT) sector. Here, the hybrids take advantage of the best from both worlds by tapping into global capital through the financial institutions of the advanced countries (such as foreign venture capital) and a strategically China-based operational strategy that locates their core corporate activities in China. The China-based operational strategy differentiates the ethnic Chinese foreign-invested firms from foreign multinationals (MNCs), thus making them “hidden dragons.” Global capital is important as it solves the recurring problems of market failure in developing countries as well as government failures in a dysfunctional Chinese financial system. At the same time, the strategic commitment to China spurs local diffusion of knowledge and human capital. Through a combination of global finance and a commitment to China, the hidden dragons contribute more than other actors to technological development in China. By contrast, the domestic firms, which are the beneficiaries of various state industrial policies, are paper tigers whose technological development lags far behind their foreign counterparts.

Fuller vigorously refutes possible competing arguments in the political economy of development and comparative institutions to establish his claim that the global hybrid model is the vital driver in China's high tech development. He first examines various state policies that aimed to cultivate technological development and domestic entrepreneurship in the IT sector, ranging from efforts to develop national champions, to building innovation clusters modelled on Silicon Valley, to funding R&D projects. He systematically compares these state initiatives with the global hybrid firms embedded in ethnic Chinese networks with foreign financing, and demonstrates how the latter outperformed the domestic firms in various kinds of technology upgrading (e.g. patent data). The findings show that China's dysfunctional financial system and its weak state capacity in monitoring firms' performance, unlike the predecessor systems in the North East Asian developmental states, proved incapable of spurring domestic high-technology entrepreneurship.

The second half of the book is a detailed case study, in which the author convincingly illustrates the profound contribution of global hybrid firms towards the development of the semiconductor industry in China, especially in fabrications and design. Fuller concludes with his assessment of the future scenarios of China's path of development. The fact that global hybrid-driven development was made possible in an institutional space with the consent of the Chinese state to attract foreign direct investment and permit wholly foreign-owned enterprises suggests that politics will determine the sustainability of the hybrid-led developmental model. Should the Chinese state tighten its control and cut off access to foreign venture capital, or reduce openness through protectionist policies, it would likely undermine the current path of development fueled by the hybrid foreign-invested firms.

The book immediately raises the question of why certain hybrids thrived under this specific window of opportunity but not others. Was there a political objective behind it, especially since the author infers that the hybrids grew under a specific set of national institutions where politics prevailed? Moreover, the successful hybrids Fuller references are mostly entrepreneurs and established corporates that have connections with or originate in Taiwan and Hong Kong. China has implemented different policy incentives to attract investment from these places (e.g. the so-called patronage policies for compatriots from Taiwan), as a result of its political agenda that aims to increase economic integration that could ultimately lead to political integration. If this is the case, would Fuller's study benefit from an analysis of the political economy of the cross-Strait relations to understand the hybrids' strategic commitments to China? Moreover, as Fuller demonstrates, the hybrids that have outperformed MNCs in technology upgrading are small start-ups and established hybrids coming from Taiwan, Hong Kong and Macau, which are much smaller and less technology intensive than their major MNC competitors. What gives them leverage against the MNCs? Can a simple strategic commitment to China account for their success in technological upgrading?

Paper Tigers, Hidden Dragons makes several key contributions. By emphasizing the foreign financial institutions embedded in a certain type of transnational ethnic network, Fuller provides a refreshing and fine-tuned account of the current research on transnational networks and technology communities in certain locales, and by specifying the mechanisms of how such growth occurs, he moves beyond cultural arguments that blood is thicker than water or that the presence of the transnational ethnic network alone will lead to development. At the same time, Fuller's global hybrid model is a nuanced thesis that specifies the conditions under which exogenous market-sounding institutions can be conducive to development and solve the problems of weak domestic institutions that plague many developing countries.

This book gives a rich and vivid account of the origins and development of China's high technology entrepreneurship based on the author's extensive fieldwork and longitudinal data over the course of 12 years. Fuller's justification for choosing the IT industry is compelling: IT is an epitome of a globalized industry in which increasingly fragmented and modularized production chains in different locales allow many late-late industrializers to tap into the opportunities by focusing on one segment of the value chain. Moreover, the IT industry is considered China's pillar industry in the country's current technology quest. The result of Fuller's research is a meticulous, theoretically insightful book on the political economy of China's high technology development. It is an essential text for those who are interested in development in East Asia and the political economy of development for late industrializers.