How external partnering enhances innovation: evidence from Chinese technology-based SMEs

Abstract

If China is to make the leap from being a manufacturer of goods, often for others, to being a world-class innovator, then Chinese small and medium sized enterprises (SMEs) have an important role to play in achieving this future goal. Much recent debate has focused on innovation activities of multinational corporations in China, with little attention paid to the role of indigenous SMEs and how they attempt to become more innovation oriented. This paper presents findings from 10 case studies of SME firms based in the Zhejiang Province of China to try and establish to what extent external partnerships have helped them become more innovative and competitive. The most common forms of partnering used by these firms is collaboration with universities, with customers and key suppliers, which has implications for how learning and absorptive capacity affects the firm's innovation strategy.

Keywords:

• Chinese SMEs
• external partnering
• innovation

Notes

‘Innovation capacity’ is a term often found in many different literature sources ranging from management journals to international policy level reports and the term is sometimes loosely interchanged with the terms ‘competence’ and ‘capabilities’. Our perception of the term ‘innovation capacity’ within the context of this paper is that this term refers to a continuous improvement of the overall capability of firms to generate innovation for developing new products to meet market needs. Hence the firm's ‘capabilities’ (meaning internal resources and routines) are mobilised to help convert the knowledge acquired from external sources into end products and services. In order to be competitive these products and services must provide the firm with some competitive advantage. Therefore the capabilities are given strategic intent in the form of competences, which ensure capabilities are used in a way that helps the firm to differentiate its offerings from competitors so that a core competence should be difficult for competitors to imitate. For example, see Coombs (1996) for further information on this aspect.