1 Competence development on the shop floor and industrial upgrading. Case studies of auto makers in China By Ulrich Jürgens and Martin Krzywdzinski Project Group “Globalization, Work and Production”, Social Science Research Center (WZB), Berlin, Germany ulrich.juergens@wzb.eu martin.krzywdzinski@wzb.eu This is the authors’ accepted version of the paper. The paper was published in the International Journal of Human Resource Management as advanced access on July 16, 2014. Abstract Industrial upgrading in China is rapidly increasing the competence requirements for employees on the shop floor. The institutional environment in China, however, does not seem very supportive: the quality of vocational education is often low and Chinese labor law provides strong incentives for companies to use temporary labor. This article examines the competence development practices for blue-collar workers in automobile companies in China. Against expectations, automobile companies in China do not pursue ‘low road’ strategies but have designed intensive internal training programs and long-term career paths for blue-collar workers. Different theoretical explanations for the competence development approaches are discussed: human capital theory, high-commitment work systems theory, production systems theories, industrial relations and institutionalist theories. The article is based on qualitative case studies of German, Japanese, and domestic automobile manufacturers in China. Keywords: China, automotive industry, competence development, human capital, production systems, industrial relations Subject classification codes: I25, J24, L62 1. Introduction The rapid growth of Chinese manufacturing and industrial upgrading i.e., the increasing importance of mid-tech and high-tech industries, have far reaching consequences for workforce management. They can be the starting point of a high-road trajectory (Sengenberger and Pyke, 1992), which combines economic and social upgrading. A still abundant and comparatively cheap workforce and employer-friendly labor regulations, however, provide opportunities for low-cost strategies. Companies can try to exploit the advantages of an unskilled and cheap labor force or they can base their competitiveness on investments in the competences of their employees. There are strong linkages between industrial upgrading and competence development at the shop floor level. Much of the debate about upgrading has focused on the area of new product development (Brandt and Thun 2009; Herrigel 2010). To be competitive product development must achieve a short ‘time to market’ performance and must consider assembly aspects at an early stage, in particular in industries with highly integrated product architectures such as the automobile or the machine tool industries (Fujimoto and Oshika 2006). Such an approach