An Exploratory Study of How Latecomers Transform Strategic Path in Catch-Up Cycle

Xiaoli Li,Hongqi Wang

doi:10.3390/su13094929

Abstract

In catch-up cycles, the industrial leadership of an incumbent is replaced by a latecomer. Latecomers from emerging economies compress time and skip amplitude by breaking the original strategic path and form a new appropriate strategic path to catch up with the incumbents. Previous studies have found that the original strategic path is difficult to break and difficult to transform. This paper proposes a firm-level framework and identifies the impetus and trigger factors for latecomers to transform the strategic path. The impetus is the mismatch between strategic mode and technological innovation capability. The trigger is the progressive industrial policy. Based on a Chinese rail transit equipment supplier’s (China Railway Rolling Stock Corporation; CRRC) catch-up process, this paper finds that the strategic path transformation is an evolutionary process from mismatch to rematch between strategic mode and technological innovation capability. With the implementation of industrial policy, the technological innovation capability will change. The original strategic mode does not match with changed technological innovation capability, which leads to performance pressure. With the adjustment of industrial policy, a new strategic mode adapted to new technological innovation capability emerges. This paper clarifies the source that determines successful catch-up practices for latecomers and contributes to latecomers’ sustainable growth in emerging economies.

Highlights

The catch-up cycle refers to the phenomenon of successful industrial leadership changes [1]
To explore the strategic path transition process, we divide China Railway Rolling Stock Corporation (CRRC)’s Electric Multiple Units (EMUs) technology development into three stages: exploration stage, localization stage, and standardization stage based on a technology development curve and characteristics, and combined with suggestions of managers and technicians (Table 3)
Technological innovation capability (TIC) and strategic mode (SM) and the role of industrial policy. These two factors did not exist at the beginning of EMU construction in CRRC but only occurred and changed in the subsequent process

Summary

Introduction

The catch-up cycle refers to the phenomenon of successful industrial leadership changes [1]. Latecomer firms achieve a substantial closing of the gap in technology and market share with incumbents. In this process, latecomers break the original strategic path and form new approaches to skip certain technology stages with time compression and amplitude leap [2]. Previous research has focused on explaining why paths are challenging to transform [4], whereas the causes of the path change have called for discussion, especially concerning how latecomers can maintain sustainable growth [5]. Unlike some studies that emphasize the importance of new technology paradigms to transform the strategic path [6,7], we focus more on the factors that cause the industrial firm-level changes in emerging economies. In catch-up cycles, the acquisition of sustainable competitive advantage

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Conclusion