Exploring technological innovation trajectories through latecomers: evidence from Taiwan's bicycle industry

Abstract

By examining the technological innovation trajectories of Taiwan's bicycle industry over the last 30 years, this paper identifies three specific periods that constitute industry cycles with peaks occurring in 1980, 1990 and 2002. In each period, innovation capabilities within the six bicycle subsystems shifted, accompanied by variations in the needs of international markets and in export performance. The empirical results demonstrate that innovation activity in the production of key components by technological latecomers increases only when that of the market leaders is in decline. It is also demonstrated that through incremental technological innovations, taking advantage of modularity and appropriate strategic organisational innovations, such latecomers can become and remain competitive in the international market. By providing an understanding of the sequences that make up modularised technological trajectories and of the cycles experienced by the global bicycle market, this study is able to elicit some practical insights into the policy and managerial implications for latecomers involved in technological innovation.

Keywords:

• technology innovation
• patents
• latecomer
• bicycle
• industry cycle
• Taiwan

Acknowledgements

The first author would like to acknowledge the financial support from the Cycling & Health Tech Industry R&D Center and the National Science Council (NSC-99-2410-H-007-005-MY3) for this paper. The authors are grateful for the assistance provided by Mr Jia-Liang Yan for clarifying the categories of bicycle subsystems for this study.

Notes

A ‘latecomer’ is defined as a country that can exploit its late arrival in an industry to tap into advanced technologies rather than having to duplicate its entire previous technology trajectory, thereby turning its disadvantages into sources of advantage (Mathews 2002).

A critical contribution made by Romer (1990) was the argument that technical innovation is explicitly formulated as product innovation whereby new markets and sector reorganisation are introduced through new products. The other type of innovation is process innovation in which new and improved production methods (usually through specialisation and mechanisation) are introduced to increase productivity. Therefore, process innovation is more popular in the prosperous stage of business cycles, where entrepreneurs will give more emphasis to process innovation rather than to product innovation.

A Marshallian industrial district is a specific locality with the following characteristics: (1) there is a certain type of productive specialisation; (2) it is characterised by a high density of small-medium size firms; (3) it exhibits cooperation along the supply chain because there is an extended inter-firm division of labour; (4) the leadership is typically derived from a special industry; and (5) a large variety of similar producers are located in the same area, thereby stimulating high levels of creativity and, sometimes, intercommunication of ideas between machine makers and users (Marshall 1919, 287, 603).

Because of the industrial fragmentation in the global bicycle industry, the international leaders in this study are defined as those who were listed before 2000 as the top major players/brands in Japan, the USA and the EU in terms of the six bicycle subsystems, respectively. This was the period when Taiwan's latecomer producers, such as Giant, Merida and Sun Race, had not yet turned into innovators or become major competitors for the existing international leaders.

Increasing market value through strategic organisation innovation is not only manifested in Taiwan's bicycle industry as the ‘A-Team’, but also in the ‘M-Team’ of Taiwan's machine tool industry that was ranked number six in the world in 2006 in terms of production value.