Market Insights and Product Technology Build-up: Latecomer Firms’ Catch-up Strategies

Abstract

Prior research has provided new insight into catching-up by latecomer firms but leaves an important question unanswered: the strategies of local latecomer firms during the catching up dynamics and surpassing processes in emerging markets. Through multi-case research of China’s smartphone industry, we develop a theoretical framework explaining how latecomer firms grow and gain sustainable advantages via different strategic choices. We identify two strategic action paths that latecomer firms can follow to catch up and surpass the market leaders. One path is from exploring new business opportunities via deep market insights, followed by building up technologies. Another strategic path is from product technology build-up to market insights exploration. Firms following this path usually start with building up essential product technologies. They also act as fast followers by quickly capturing new market opportunities. As these companies develop, they improve their efforts to gain market insights and explore new opportunities. We find that market insights exploration combined with product technology build-up helps local latecomer firms gain sustainable advantages. The insights from this study broaden the understanding of the strategies for latecomer firms to catch up and surpass in emerging markets. This study challenges this “first imitation, then innovation model” mentioned in previous literature. Our study also shows that latecomer firms can pursue cutting edge innovations early on in their catching up activities. This study has important implications for helping latecomer firms to achieve sustainable advantages and growth via different strategic paths based on their heterogeneity.