Exploring innovation in Shanzhai: the case of mobile phones

Abstract

Chinese innovation in low-cost, ‘good enough’ electronic products has been very active. Such products may be copies of current branded goods that are positioned as straightforward counterfeits, knock-offs, or Shanzhai. In this paper, we argue that this simplistic analysis is inadequate to describe novel approaches to the production of new goods and that a new system of innovation is emerging. This novel innovation system has a distinct set of context specific actors and intra- and inter-firm structures that have aided the technology innovations and the development of new business models. This paper employs a case study method and uses qualitative data to explore how innovations emerge in new mobile technologies and the innovation system that supports their emergence. It examines the Shanzhai mobile phone industry as a case and provides a first attempt to map the innovation system that has developed. The results suggest that the distinctive characteristics of the Chinese innovation system contribute to the innovations around the product and the production processes. It further confirms the suitability of applying the innovation system approach to Shanzhai phenomenon, and explores new forms of innovation dynamics. The paper concludes with an initial agenda for further research in this area.

Keywords:

• Shanzhai
• innovation system
• system of innovation
• imitation
• innovation

Notes

1. Based on our interviews, the concept-to-deliver time in Shanzhai mobile phone makers could be as short as 45 days.

2. This cluster specialised in manufacturing primarily for export; example industries include Information and Communication Technology and consumer electronics, it is one of the first and most important hi-tech regions in China’s ‘opening-up’ period.

3. This cluster is known for its cluster of large, economically developed cities such as Shanghai, Suzhou, Hangzhou, and so on. The area specialised in a wide range of manufacturing from garments to automobiles, and from food to hand crafts.

4. Data from the Gartner report, see http://tech.sina.com.cn/t/2014-01-21/16419115860.shtml, accessed 25 April 2014.

5. Based on our interviews with key stakeholders in the industry and public information including news articles, online articles, and research report, we categorized the development into three stages.

6. Interview with an anonymous Independent Design House (IDH) Director.

7. Mobile phones still need to be tested by authorised organisations before being sold to the market.

8. One primary challenge in research into Shanzhai relates to the access of data. As referred to by many researchers as an informal economy, ‘much of the value that accrues does not appear in official statistics’ (Zhao and Keane 2012). It is extremely difficult to find accurate statistics for the Shanzhai industry but the trend is confirmed by all of our interviewees during fieldwork.

9. Interviews

10. We have cited some figures from a commercial report at the later part of this study.

11. Interviews. ‘Big four’ refers to Zhongxing Telecommunication Equipment (ZTE), Huawei, Coolpad and Lenovo.

12. http://www.technobuffalo.com/2013/04/09/samsung-galaxy-s4-shipments/, accessed 25 April 2014.

13. Interview.

14. Several people we interviewed have confirmed this but were reluctant to provide further information. We neither highlight this point nor ignore it. Listing it here does not imply any preference of position from the author.

15. Description on turnkey supplier and sourcing agent are located in Section 5.

16. The 2-sim solution was first applied on the Shanzhai handset and had later been adopted by Samsung.

17. See endnote 6.

Additional information

Funding

The completion of the research and the paper was funded by the Humanities and Social Science Fund from the Ministry of Education of the People's Republic of China [grant number 13YJC630024].