Global Manufacturing and Secondary Innovation in China. Xiaobo Wu
2000, with the funding support of Natural Science Foundation of China (NSFC), I had been chairing the research project of “Manufacturing Globalization and Secondary Innovation Strategy”. The project laid a solid foundation for the research contents included in this book. Since 2013, I have been chairing the NSFC key research project of “Theoretical Studies on Chinese Companies’ Independent Innovation and Technology Catch-up: Mode, Mechanism and Dynamic Evolution” (No.: 71232013). This book is the result of deepened and sorted findings from this research project.
How did Chinese manufacturing companies find out the appropriate pathways for technology catch-up? Did they copy the technology catch-up experiences of Japan and the Republic of Korea? Did they follow their European and American counterparts in conducting original innovation? The exploration of technology catch-up pathway adapted to Chinese context starts from the in-depth understanding about the technology catch-up environment of Chinese manufacturing companies. In his book Imitation to Innovation, Mr. Linsu Kim points out that the drastically changing global economic environment makes it difficult for other technology catch-up countries to replicate the path of the Republic of Korea. This is also true for China’s technology catch-up. Besides the drastically different international economic environment of technology catch-up process, China has a huge, multi-tier and diversified domestic market which Japan and the Republic of Korea did not have when they were in technology catch-up. The openness of China’s market to FDI (foreign direct investment) and the size of ODI (outward direct investment) are far greater than those in Japan and the Republic of Korea in their technology catch-up. In addition, new technologies such as big data, IOT, AI are deeply integrated with manufacturing technologies. Surging knowledge economy, hybridized and compounded science and technologies, together with the taking-off of many sophisticated technology systems and disruptive innovations, trigger the structural reform of the world economy. The roaring manufacturing globalization pushes the competition border of Chinese manufacturing companies from the domestic market to the global market. Such new competition environment determines that Chinese manufacturing companies need to set foot on a technology catch-up path that is different from those of Japan and the Republic of Korea. This is also an important reason why I decided to combine manufacturing globalization and secondary innovation strategy into one study.
So, what makes the “secondary innovation” technology catch-up path of Chinese manufacturing companies different? Its dominating feature is its “openness”. Such innovation is conducted under the backdrop of international open environment. Compared with the conventional close-end, linear view of “introducing—digesting—reinnovating”, the dynamic mode of secondary innovation puts more emphasis on the openness of the environment and the system. Explanations have been made about the openness of the environment. How is the system’s openness reflected? On the one hand, actively engaged in the roaring globalization, Chinese manufacturing companies pursue the strategies of “bringing in” and “going global”. Particularly after the implementation of the Belt and Road Initiative, more and more Chinese manufacturing companies proactively participate in the global competition, setting up overseas manufacturing bases and R&D facilities. Through acquiring overseas assets, they access the valuable resources including technology, brand, channel etc. By sufficiently leveraging domestic and overseas markets and resources, Chinese manufacturing companies boost their technical capabilities to gain market competitiveness, instead of only through localizing the introduced technologies. On the other hand, it’s about the “non-linear” implementation model of technology catch-up. Japanese and the Republic of Korea were stepwise in the progress of “from imitating to innovate” in the development of their heavy and chemical industries which have longer technology lifecycles. Chinese manufacturing companies adopt a different approach. Besides the conventional technology introduction, many open innovation mechanisms such as technology outsourcing, technology alliance and company clusters are widely applied and seen in the technology catch-up of Chinese manufacturing companies. For example, they often join the international manufacturing virtual division, build extensive but flexible technology alliances and strategic alliances with overseas manufacturing companies. More importantly, during the faster “paradigm transitioning” in technology lifecycle, Chinese manufacturing companies secure the “window of opportunities” and “beyond catch-up” through “unlearning” and “fast iteration”. Many successful and unsuccessful experiences tell us that the innovation path for the majority of Chinese manufacturing companies is not a simple and linear switchover from imitation to innovation. Equally, it’s not to simply equate “independent innovation” to “primitive innovation” and “original innovation”. On the contrary, it’s a “secondary innovation” evolution journey interwoven with learning and creation in the open environment.
Looking back, in a very long time since I started to build up the theory for “secondary innovation”, people in academic community had been harboring doubts about whether Chinese manufacturing companies are capable of “post-secondary innovation” and “primary innovation”. Often, I feel worried about the numerous barriers of technology catch-up for China’s manufacturing industry in the global competition. Can China’s manufacturing companies really be international leaders in technological capabilities? This is the question I keep asking myself. During the prolonged follow-up studies on companies including Hangyang, Haier, Geely, Hikvision and many others, by acting as their consultant, an independent board member or other assigned roles, through constant, intensive interaction in the “theory—practice—theory” mode, I was able to get more and more confident about the “catch-up and beyond catch-up” of Chinese manufacturing companies. Now, a large number of excellent Chinese manufacturing companies, including Huawei, Haier, Geely, Hikvision, respond to this question with their actions and achievements: “Secondary innovation” creates and catalyzes the “beyond catch-up” of Chinese manufacturing industry, and makes it the industrial leader in the world. Reviewing the growth trajectories of these companies, we can find out that, having been powered by the vision of being “the world’s first-class manufacturing companies” and facilitating China’s upgrading from a manufacturer of quantity to one of quality, they continuously make breakthroughs with limited resources and capabilities and achieve this “mission impossible”. With the correct “secondary innovation” strategy, management system, and learning mode, “catch-up” is upgraded into “beyond catch-up”. Their practice is also the best evidence and driver for the development of “secondary innovation theory”. I believe that the well-organized “secondary innovation theory” will also motivate and help more latecomer companies to achieve effective innovation catch-up and beyond catch-up. Successful “secondary innovation” cannot only speed up China’s innovation-driven national development, it also will motivate and help more manufacturing companies from developing countries to achieve effective innovation catch-up and beyond catch-up.
The publication of this book would have been impossible without the support from many forerunners and peer scholars. Great acknowledgements firstly go to my mentors: including, Prof. Xu Qingrui at School of Management, Zhejiang University, PhD supervisor, and member of the Chinese Academy of Engineering; Prof. Sir Mike Gregory, my mentor at Cambridge University when I was a visiting scholar; Prof. James Utterback, my mentor at MIT Sloan School of Management when I was a Fulbright Scholar. Their dedicated and attentive instructions guided me into such an intriguing and lifetime-worthy research field. I also want to give special thanks to my former PhD student, now my colleague, Associate Prof. Ms. Du Jian, and my present PhD students including Zhang Haoyu, Zhao Ziyi and Zhou Chao. Their participation and assistance helped me complete the manuscript. I also want to thank other peer researchers for their advice and comments. Their honest and candid advice helped to point out the right direction for this book. At last, I want to give a lot of credits to my friends from the manufacturing industry, whose unreserved sharing enriches this book.
Criticisms and suggestions from all readers to this book will be highly appreciated!
Xiaobo Wu
Contents
1.1 New trend of globalization