Windows of Opportunity, Capability and Catch-Up: The Chinese Game Industry

Abstract

ABSTRACT This study examines the catch-up experiences of the Chinese game industry from a neo-Schumpeterian perspective. It determines that Chinese indigenous firms succeeded in catch-up by strategically responding to favourable policy changes, such as a quota system that limited the import of overseas games and content inspection by the government. It is found that China has established its capabilities in a quite different manner than the experience of advanced countries during the dynamic catch-up process. This verdict shows that the order of capability development of late-comer countries can be different from that of advanced countries. Despite numerous studies that emphasise the role of government, we argue that, even when the market is unsegmented, if foreign knowledge is accessible, then the necessary intervention can involve little more than the protection of the initial market in the form of exclusive licensing, import restriction, not sharing R&D costs or promoting marketing activity. Despite exclusive licensing, import restriction and piracy, overseas game firms continued co-operating with China in the form of a publishing contract and IP sales due to massive market opportunities in China. This indicates that a large country with an immense domestic market can differentiate its catch-up strategies from those of small-market countries.