Reshaping the business ecosystem in China: case studies and implications

Abstract

PurposeThe purpose of this paper is to explore a way to reshape the business ecosystem for existing industries by comparing traditional and Shanzhai networks in China. The research is also conducted on the supporting activities by service intermediaries in the ecosystem.Design/methodology/approachThis research starts with a literature review on firms' strategy of industry maturity from three perspectives, including technology orientation, innovation orientation, and network orientation. The approach of multiple case studies is adopted to unveil the reshaping process of the business ecosystem. Two types of networks are mapped: the traditional mobile companies' network and the Shanzhai network. Intra‐network and inter‐network cross‐case analyses aim to generate the research findings and provide implications for different ecosystem players.FindingsFirst, the relationship between industry and the business ecosystem is placed into a two by two matrix. Second, in order to reshape the business ecosystem, the traditional network prefers geographical dispersion to other countries to establish a new ecosystem, whereas the Shanzhai network brings niche substitutes to cut down industry entry barriers. Third, government agencies, as one of the service intermediaries, not only support the traditional network dispersion by providing preferential policies, but also support the reshaping process enabled by the Shanzhai network with legal guidance and resource capture. Fourth, other service intermediaries such as law firms, technology services, talent searchers, financial and industry associations, have greater impact on the Shanzhai network than on the traditional network. Fifth, from the comparison between these two networks, strategies to reshape the ecosystem can be differentiated in five aspects: frugal solution, platform enablement, organization recentralization, downstream innovation, and regulation adaptation.Research limitations/implicationsThis research further develops the observations into service intermediaries not only in core business but also in the extended level of the business ecosystem. The Shanzhai phenomenon also provides an excellent example implicating classical theories like cluster, innovation and global manufacturing virtual network. From a methodology perspective, this research combined the roadmap methods and cross‐case analysis. However, this study focuses more on Shanzhai network study than the traditional network.Practical implicationsFive nurturing strategies implicate small firms in the Shanzhai network and large firms in the traditional network as well as service intermediaries.Originality/valueThis paper is the first one to deeply study the relationship between industry and the business ecosystem in China, and the reshaping process of a mature business ecosystem from the traditional network, Shanzhai network and service intermediaries' perspectives.