Strategic transformation of Shanzhai firms: evidence from a Chinese case

Abstract

The last several years have witnessed a huge growth of the Shanzhai mobile phone firms. However, in order to acquire long–term competitive advantages, Shanzhai mobile phone firms must make strategic transformations. This paper tries to explain the emergence and growth of Shanzhai mobile phone firms from theoretical views of modularity and disruptive innovation, and suggest that technological modularity facilitates the evolution of industrial value chain, which greatly lowers the threshold for local small firms' entry and promotes disruptive innovations. Shanzhai mobile phone firms start from low–end disruption, and by accumulating technology and market knowledge through resource integration, some of these firms can work their way up to eventually achieve independent innovation and their own brands, becoming major players in the market. Based on the case study of a Chinese firm, this paper explores the theoretical model of how Shanzhai mobile phone firms realise strategic transformation, and then discusses...