Innovative or imitative? Technology firms in China

Abstract

This paper has two aims. First, we clarify the belief that many Chinese firms have operated quite successfully both onshore and offshore by following cost-cutting strategies, through process efficiency rather than innovation. Second, we explain the reasons why Chinese firms are not all innovative by means of a review of empirical studies, as well as our own examination of two technology companies. We argue that there might be a dynamic sort of innovation that combines strategic costing with organisational and technological changes, and which has contributed to the fast growth and business success of some Chinese firms on the global stage in recent years. We use institutional theory and a resource-based view of the firm to explain why firms follow either innovative or imitative strategies. In analysing the three areas of innovation in two technology-based firms, we detect both innovative and imitative behaviour in Chinese firms. Our conclusion is that not all Chinese firms are innovative. Most Chinese firms follow an imitative strategy because of an imperfect institutional environment which diminishes the protection of intellectual property rights, which we regard as a prerequisite for innovation. Where Chinese firms do exhibit innovative behaviour, this is still predominantly strategic cost innovation, not innovation as it is commonly perceived and understood by researchers in the West.

Acknowledgements

We thank Dimitris Assimakopoulos of Grenoble Ecole de Management, and Yipeng Liu of the Institute for SME Research and Entrepreneurship at Mannheim University for their comments on the initial conceptual paper presented by the first author at the 10th European Academy of Management, held in Rome in May 2010. Professor Assimakopoulos especially encouraged us to collect data to strengthen the paper with empirical evidence. Without his invitation and encouragement, the new version of the paper could not have been born. We also thank two anonymous interviewees for allowing us to collect much needed empirical data and for the comments made by two reviewers. All errors remain the responsibility of the authors.