Rapid innovation practices in Chinese firms: a case study from the construction equipment industry

Rapid Innovation Practices in Chinese Firms: a Case Study from the Construction Equipment Industry

This study examines the competitive strategy of Overseas Chinese firms in South-East Asia. The literature on Overseas Chinese business performance indicates that Overseas Chinese firms are a significant business force in South-East Asia and that these firms have been very successful. The literature seeks to explain this success and advances two main strands of explanation: one attributes success to features of the business environment faced by the Overseas Chinese in South-East Asia, the other to Chinese cultural values. Reflecting on this extensive body of literature, one point stands out: there is no clear definition of what is meant by 'success'. Moreover, both strands in the literature essentially treat Overseas Chinese firms as one homogeneous group. No one has asked whether Overseas Chinese firms do business in ways that give them competitive advantage relative to indigenous (e.g. Malay or Javanese) or Western firms. This thesis introduces the resource-based view of the firm (RBV) as new discourse to the study of Overseas Chinese business performance. The RBV seeks to explain why some firms consistently outperform competitors and focuses on a firm's distinctive capabilities as an explanation of a firm's ability to obtain competitive advantage. In this research, the competitive strategies of Overseas Chinese business firms have been analysed using insights from the RBV. The research explores whether, within the same industry and the same business environment, individual Overseas Chinese firms pursue competitive strategies that are very different both from each other and from those of competing Western firms. The methodology used in this research is termed scientific realism. The research design is based on an approach in which theory is built from case studies. The data collection followed two methods: industry analysis and case studies. Eleven firms operating in the latex glove manufacturing industry in Malaysia were studied. The relative recent inception of this industry in Malaysia in 1987 allowed for a retrospective analysis of the case study firms' competitive strategies from their establishment until the time of the interview. The research found that there are two main types of Chinese firms in this industry: the professional Chinese firm and the traditional Chinese firm. A 'competitive and corporate strategy matrix' was developed to indicate the relative position of the case study firms in terms of competitive strategy (i.e. degree of involvement in marketing. product and production process development, and brand development) and the degree of focus of the firm's corporate strategy. The business strategy of the two types of Chinese firms differs in the extent to which the firm is involved in product development and the marketing of its products to end-users. The corporate strategy of the two types of Chinese firms also differs with the traditional Chinese firm following a corporate strategy of diversification. The traditional Chinese firm often manages a portfolio of unrelated businesses and adopts an opportunistic approach to investment in the businesses. The corporate strategy of the professional Chinese firms is more focused and allows them to stay in the glove manufacturing industry for the long term by making long term investments. The theory developed through this research is that there are different types of Overseas Chinese firms that have different competitive and corporate strategies. A combination of a competitive strategy, in which the firm has a high involvement of the marketing of its products to end-user and uses the feedback obtained from this involvement in the development of new products and production processes, and a corporate strategy that allows the business unit to have a long-term commitment and focus on the business activity, will lead to the development of distinctive capabilities. These distinctive capabilities may lead to a competitive advantage of the firm over its competitors.

The inner circle of technology innovation: A case study of two Chinese firms

Based on an abductive approach, a case study is performed on two Chinese multinational corporations (MNCs) operating in the construction equipment industry. These firms do not yet compete directly with major global firms. The reason for this is that Chinese firms have mainly built up international competitive strength in the low-price segment. A major result is a theory on the initial internationalisation strategy of Chinese firms. The main strategic counter-move by European MNC and other major incumbents seems to be to enter the low-price segment in emerging markets, for example, by acquiring local Chinese brands.

The internationalization of Chinese companies is a new reality. This is even more innovative if we isolate Chinese private firms and in particular those having businesses in developed countries as targets. If the first internationalizations of Chinese private firms to developed countries showed us less than optimal results; the latest show mixed outcomes. Interestingly, some of the latest firms with positive results are breaking through stable and complex global value chains, such as the automotive industry, to become first tier suppliers to transnational assemblers and even acquire large and apparently more capable first-tier global suppliers in developed countries. Based on the relevant literature, namely: automotive global value chain (Holweg et al., 2009; Humphrey & Memedovic, 2003; Sturgeon & Lester, 2004; Sturgeon & Van Biesebroeck, 2011; Thun, 2001); developing countries firms internationalization (Boisot & Meyer, 2008; Buckley et al., 2007; Child & Rodrigues, 2005; Dunning, 2006b; Luo & Tung, 2007; Mathews, 2006); and Chinese business system (Redding & Witt, 2009; Whitley, 1992, 1999b; Witt & Redding, 2013a, 2013b; Zhang & Whitley, 2013); this is not expected. This is why we decided to thoroughly understand the dynamic capabilities of one of such firms. Using an in-depth case study the analysis was performed with an integrative tri- perspective approach using institutional, industrial and firm levels. The starting point was on the understanding of the dynamic capabilities that the Chinese firm had since its incorporation until become a first-tier supplier to a transnational assembler followed by its internationalisation. Delving deeper into the internationalisation of the organisation, the study analysed, using the business system framework, how the Chinese firm was able to acquire and manage its new acquisition, which had superior tangible and intangible capabilities, and successfully overcame the predictable clashes that such a setting creates. This is in line with the call for exploratory research (Deng, 2012; Meyer, 2014; Narula, 2012; Ramamurti & Singh, 2009) due to the still infancy of the problem under study, the anecdotal descriptions, and the lack of reliable quantitative data. Our findings show us a Chinese firm with specific and divergent dynamic capabilities since its incorporation, when compared with the expected and typical companies, that should have emerged from the Chinese business system. A clear focus in a unique industry associated with the ambition, yet constraints, to become a global company, combined with the necessity of an industrial upgrade, and a deliberate strategy that allowed the firm to become a turnover company of €1 Billion in less than ten years. Furthermore, the long-term vision of the group and the use of a supportive partnering strategy for the post- acquisition period has been an essential component of the firm’s success. Finally, we found that the firm has been joining disperse competences and resources it was lacking, using different dynamic capabilities, by grouping and directing them into a specific well-stated vision. From a theoretical perspective, these findings are particularly important since they do not support the institutional arbitrage literature nor accommodate the current different theoretical extensions on international business literature. From an empirical sense we explain that firms are not fate to integrate in a post M&A period and describe how this can be achieved.

The rate of innovation in construction equipment is measured by using two variables over a 30-year period, 1962–92: The number of new models introduced every year and the technological life of eight earthmoving equipments are considered in this study. The findings indicate that the rate of innovation in the construction equipment industry increased in the 30-year study period. The findings also suggest that these innovations are incremental in nature, stimulated by technological advances in other industries, but primarily driven by market forces. Technological advances are not confined to the industry that produces innovations. The mapping of the interindustry flow of innovations highlights that while construction companies play a predominant role in generating their own technological innovations, they are also heavily dependent on other industries, such as the construction equipment industry for the flow of technical system innovations. As such, the continuous and incremental innovations in the construction equipment industry are bound to act as a catalyst for the generation of technological advances in the construction industry.

External risk management encompasses many areas such as finance, politics and national cultures. Although external risk management is a critical success factor for many construction firms which have ventured out of their home countries, factors like project risks are often neglected by construction firms. This study in particular adopts the proposition that the practice and knowledge of risk management in Chinese construction firms is low in their home market, and that holistic risk management is not a priority in their management strategies. This also appears to be the case when they venture into the international arena. The objective of this study is to examine how construction firms attempt to manage external risks during the period that they venture into other countries. To achieve this objective, a case study approach is adopted to understand the external risk management practices of a Chinese construction firm venturing into Singapore. The results of the case study support the proposition that the practice of holistic risk management in Chinese firms is indeed low, and that formal risk management is not in place. The empirical findings also suggest that the difficulties in managing external risks lie in the decision that the Chinese construction firm makes on exactly how management wishes to manage such risks. There are myriad solutions to handle each type of external risk but Chinese construction firms need to be cautious and selective in choosing a suitable response that is beneficial for the company.

Building Information Modeling (BIM) is becoming increasingly important in the construction industry and affects almost all stakeholders from building owners, planners and contractors to building operators. However, little importance is given in the academic debate to the relationship between BIM and construction equipment providers. This raises the question how the BIM method can be used to generate benefits in this sector. The presenting researchers, in cooperation with a local construction equipment provider, have selected its container construction division as a case study and analyzed how current processes can be streamlined and automated with the help of BIM. In this context, new automation processes, BIM-object libraries and add-ins for one of the most common BIM authoring software have been developed. Through this modular design approach, a flexible and lean BIM-based Configure-to-Order production system is created. This study presents the conceptual development of this BIM-based production system for construction equipment providers considering both methodological examinations and functioning software prototypes. The BIM-based production system is currently tested by the industry partner in pilot projects and preliminary findings are presented in this study.

PurposeIn this research, collaboration attributes related to the firm's intrinsic and extrinsic facets at pertinent levels (i.e. enterprise, strategic, operational, and tactical levels) for construction equipment OEMs (original equipment manufacturers) operating in India have been quantified and modeled.Design/methodology/approachFor modeling the intra-firm collaboration at respective organizational levels, relevant attributes have been populated employing literature review followed by subsequent validation from pertinent focus groups. The focus groups comprising professionals working in the construction and mining equipment industry in India aided us in estimating the extent of interdependencies and influences within/amongst collaboration attributes. The collaboration attributes and respective interdependencies/influences are modeled employing the concept of graph theory wherein the individual attributes are represented using vertices and influences/interdependencies are represented using edges. The collaboration indices resulting from the variable permanent matrix have been derived as well.FindingsScenario and subsequent sensitivity analysis are performed. This research discusses the significance and aspects related to various collaborative attributes and the interrelations amongst them. Further, the research also evolves quantitative measures of collaboration indices at enterprise, strategic, tactical and operational levels by employing a graph-theoretic approach (GTA). The authors have also extricated and discussed a number of meaningful implications from both the perspectives of interorganizational relationships (IORs) and the normative theory of organizations using a cross-case analysis of five firms having operations in India.Originality/valueThe research would aid organizations (particularly those belonging to the construction equipment sector) measure the efficacy of collaboration in respective value-chains at strategic, tactical and operational levels. From the theoretical perspective, the integration of the IORs and normative theory of organizations enables looking at the intra-firm collaboration problem from a multi-dimensional standpoint involving activities, performance measures, action initiation, communication, shades of top management, level of activity, etc.

Technological entrepreneurship concerns the transformation of potentially viable technological opportunities into profitable businesses. Technological entrepreneurship is recognised as a key driver of successful technological innovation. In addition, matching technological opportunities with local market needs is a characteristic feature of Chinese technology firms’ catch-up and innovation potential. However, extant research on technology and innovation management has yet to fully include entrepreneurship insights in the study of innovation, especially in Chinese firms. With this aim, the paper identifies and investigates the relationships between a number of internal and external factors and technological entrepreneurship. Using a multi-disciplinary and multi-level literature review and findings collected through case studies and interviews in 74 Guangdong technology firms, the paper presents possible explanations concerning the relationship explored and discusses their theoretical and practical relevance, with particular reference to the role of support policies, IPR enforcement and personal relationships.

Purpose – The purpose of this paper is to explore the effecting mechanism of relational embeddedness on technological innovation performance in the context of China.Design/methodology/approach – By probing into the related theories and five exploratory case studies of Chinese manufacturing firms, this paper establishes a conceptual model about the effects of relational embeddedness on technological innovation performance and proposes nine hypotheses. The authors then investigate 228 Chinese manufacturing firms by questionnaires, and testify the hypotheses and conceptual model by structural equation modeling.Findings – Chinese firm's relational embeddedness in the international manufacturing network has a positive effect on its technological innovation performance through explorative learning. Specifically, trust, information sharing and joint problem solving are beneficial to new knowledge acquisition and application, and then to the improvement of technological innovation performance.Research limitations...

Marketing planning is widely used by businesses from all areas of industry to implement the components of marketing management. This systematic process involves marketing analyses, strategy development and the design and implementation of marketing programmes. Marketing planning enables businesses to systematically review the available marketing opportunities enabling appropriate and co-ordinated marketing activities to be undertaken. This paper explains the role that marketing planning plays and shows how it is used by organisations. Each stage of the marketing planning process is described in detail and the role and format of the Marketing Plan document are explored. The marketing planning process is then illustrated using a detailed case example from the construction equipment industry. Finally, guidance on marketing planning best practice is offered.

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.

PurposeThe purpose of this study is to examine specific use of strategic alliances and acquisitions for Chinese firms to catch‐up technologically and to enhance their internationalization competence.Design/methodology/approachThe paper offers a conceptual analysis of internationalization through either FDI or strategic alliances. This is a novel approach, as most of the extant literature tends to view internationalization solely through the prism of FDI. The empirical evidence presented in the paper is twofold. First, it analyses empirical data on strategic alliances and acquisitions retrieved from Thomson SDC database, a premium business directory. Second, it also approaches the topic qualitatively, by offering a case study of Chery Automobile Co. Ltd, a Chinese company that has relied heavily on strategic alliances in its internationalization strategy.FindingsFirst, the study finds statistical evidence of a rising trend of formation of outward strategic alliances by Chinese firms. Second, the authors demonstrate the specific benefit of strategic alliances for Chinese firms to technically catch up and enhance internationalization competence. It is found that strategic alliances give Chinese firms opportunities to learn from front‐runners in terms of gaining technological capabilities, and there are advantages in tagging developing and advanced markets. The main findings suggest that the internationalization of Chinese firms is in a process in which they gradually integrate technology and marketing/logistics alliances. This approach allows for sufficient time to learn and absorb new skills and technology. Moreover, Chery's case indicates that a series of successful international strategic alliances could also generate tremendous bargaining power for Chinese firms when undertaking subsequent international activities.Originality/valueThis paper contributes to the small but growing body of literature on the internationalization of Chinese companies, their technological catching‐up activities. Unlike previous studies that mainly focus on state‐owned Chinese firms' internationalisation through outward FDI (such as M&A), the paper particularly contributes to the exploration of strategic alliances' effectiveness for private and latecomer firms' internationalization. Empirically, the data analysis and case study reflects the benefits for Chinese firms to enter into strategic alliances with European firms in order to enter into European market and to acquire technological capabilities.

PurposeChinese firms are winning market share from foreign multinational enterprises in domestic markets. The international business literature suggests that this is happening because these firms are developing non-traditional firm-specific advantages (FSAs). Strategic factor market (SFM) theory provides a good basis for explaining how this is happening. However, it is underdeveloped in terms of analysing unique resources and unique access to those resources by Chinese firms in their domestic markets. This paper aims to develop a framework to understand how Chinese firms have developed non-traditional FSAs.Design/methodology/approachThe case study method is adopted to explore how Chinese firms develop non-traditional FSAs. Specifically, the authors compare paired case studies of a Chinese firm and a foreign multinational in each of two industries.FindingsThe authors find that Chinese firms have developed non-traditional FSAs because of more relevant experience, better adapted strategies and privileged relationships. This has enabled Chinese firms to develop non-traditional FSAs.Originality/valueThe authors propose a framework that conceptualises non-traditional FSA development in Chinese firms as a product of superior access to unique and valuable resources in their domestic SFMs.