Made in China : the rise of the Chinese domestic firms in the information industry

Abstract

This research uses a multi-case analysis approach to study China's catching-up as a late-industrialized economy in the information and communications technology (ICT) industries. The significant contributions of this study are: the staged catching-up theory framework, the findings from the cases, and the policy implications. This study contributes to the late-industrialization literature by filling its theoretical gap--how domestic firms can catch up when there is strong MNC presence and what is the role of innovation capability. I develop a staged catching-up theory that can be used as a framework to analyze the successful catching-up process of domestic firms in a late industrialized economy while facing strong MNC presence. The theory describes the behavior of domestic firms, the behavior of MNCs, and the role of government, as well as the spatial implications of each stage. The case studies prove that Chinese domestic firms in the information industries have followed a path of catching-up that can be described by the staged catching-up theory, and innovation capability and self-developed technologies were the ultimate driving force that has enabled leading domestic firms to catch up with the MNCs in the telecom-equipment and PC manufacturing industries. This research validates that government involvement has rewarded the companies' efforts in building innovation capability and developing proprietary technologies. This research has implications for how China can catch up, especially through developing domestic firms' innovation capabilities, in high-tech manufacturing areas despite the strong presence of MNCs.

(cont.) Also relevant is how other countries or regions, either late industrializing countries or less-developed regions in developed countries, can use the findings from this research to facilitate the development of their local firms in high tech industries. The research stresses that domestic firms should prioritize building innovation capability from the very beginning to ramp up their competitiveness and to survive in the filtration stage, even though its benefit may not be so distinguished in the growth stage. It also suggests domestic firms focus on in-house R&D development to build their innovation capability, supplemented with external alliances, since the latter's effectiveness is conditional on the strength of the former.