Innovation, Globalization, and Catch-Up of Latecomers: Cases of Chinese Telecom Firms

Abstract

Through case studies of Huawei and ZTE, this paper finds that Chinese telecom firms have followed the general pathway of technological learning of latecomers, that is: they first developed mature foreign technologies; then moved on to higher level technologies in the consolidation stage in advanced countries; and finally progressed from imitation to innovation, generating emerging technologies in mobile communication and data-network fields. The study demonstrates that (1) latecomers caught up successfully by building innovation capability from the beginning, and (2) collaboration with established partners only came later when they had higher level innovation capability. In addition, R&D globalization was an important technological strategy for Huawei and ZTE. The order and pace of development indicate that their R&D globalization strategy is to tap into global resources and markets that would otherwise be unavailable to latecomers. At the beginning of catching-up, unlike Korean firms in the auto, electronics, and semiconductor industries who developed mature foreign technologies by relying on technology transfer from foreign sources, Chinese telecom firms conducted in-house R&D on switch technology, because of the high cost and unavailability of the technology, their lack of understanding of foreign markets and technology, and foreign firms' interest in China's market. Further, operating in a more dynamic technological regime and a much more integrated global economic environment, Chinese firms were able to adopt some global technology strategies such as joint collaboration, participating in industrial standards organizations, and R&D globalization at a much earlier stage of their catching up than had the Korean firms, mainly to compensate for their limited initial access to global resources.