Building blocks, exploitation and exploration of sectoral systems of innovation in catch‐up of China's car industry

Abstract

PurposeThe purpose of this paper is to examine evolutionary processes of sectoral systems of innovation in China's catch‐up situation.Design/methodology/approachHistory event analysis method is used. The data that inform this paper come primarily from interviews carried out as a part of case studies of the innovations of China's car industry as well as public sources.FindingsMarket catch‐up of China's self‐owned brand cars expanded from low to high end market segment. Changes of the five building blocks of innovation system of China's car industry have driven the market catch‐up since the 1980s. The five building blocks are: market demand, industrial technology and knowledge base, institutional setting, industrial structure, firms' competences and strategy. China's car industry evolved through exploitation and exploration, which were affected by the five building blocks. The exploitation and exploration shaped the catch‐up way of China's car industry: from production localization to design localization and self‐owned brands. Exploration of the self‐owned brand group built on exploitation of the joint‐venture group.Research limitations/implicationsThe findings are based on a single industry. Studies on more industries are needed to generalize the research results.Practical implicationsIncreased understanding of how sectoral systems of innovation evolve will give managers and policy makers in the developing countries like China improved opportunities to formulate policies and management practices that can cultivate innovation capabilities in catch‐up.Originality/valueThe paper contributes to the research stream on sectoral systems of innovation by understanding building blocks and evolutionary processes at the base of change and growth in the catch‐up situation.