A technological capabilities perspective on catching up : the case of the Chinese information and communications technology industry

Abstract: This dissertation provides a capability creation perspective on the story of China’s technological catching up, or resurgence, if viewed from a broader historical perspective.Since the first Asian tigers caught up to modern technological standards (e.g., South Korea, Singapore), two schools of thought have dominated causal explanations (Nelson and Pack, 1999). The first perspective is the conventional accumulation approach, which attributes the major share of growth to the accumulation of physical and human capital, and views learning as a more-or-less automatic byproduct of those investments. The second perspective is the assimilation approach, which emphasizes the arduous learning, risk-taking entrepreneurship, and innovation that is involved in the process and argues that the former proposition neglects this aspect of the endeavour and may therefore lead to erroneous estimates. This dissertation focuses on the second school of thought.Compared to the first-tier Asian tigers, the second-tier tigers, of which China is representative, pose many challenges to the assimilation approach. First, the sheer size of the country results in an unusual scale and scope of activities and interactions in any field. Second, the long history of civilization in China suggests that many modern phenomena have historical roots that are unknown to outsiders and invisible and complex to insiders. The present study aims to contribute a small piece of the puzzle to our understanding of the big picture.By providing an in-depth study of the Chinese information and communication technologies (ICT) sector, this study explores changes that have occurred in the three key building blocks of capability creation; specifically, the sourcing, generation, and appropriation of technological knowledge. A qualitative case study approach was employed for the main, empirical part of the study, which consists of extensive firm-level interviews. Complementary statistical data, including patent data and historical archives, were used to provide context and a deeper look into the study topic.The results are described in five articles. The first article presents establishing overseas research and development (R&D) laboratories as one of the major learning methods for overcoming disadvantages related to dislocation from technology sources and advanced markets. This approach allows China to search for industry-relevant scientific knowledge rather than adopting ready-made technologies introduced by western multinational enterprises in China. The second article describes the modularity-in-design approach, which opens new windows of opportunity for technological advancement. The lack of essential intellectual property rights (IPRs) acts as a key inducement and a factor-saving bias that influences the direction of innovation. When both (international) competitiveness and learning are involved in the catching-up process, the development of industry-wide capability becomes a particularly vital aspect of indigenous innovation. The third article describes the geographic consequences of historically planted industrial capabilities in China’s inland regions, which impact the absorption of different types of industrial knowledge.Fields of industry that are densely populated with patents- IPR thickets- represent a novel situation that was not experienced to the same extent by nations whose technological development occurred earlier. This thesis dedicates two articles to this dimension of knowledge appropriation. The fourth article describes the duality of Chinese ICT patenting, and the fifth article identifies an ambidextrous strategy that depends on where the major competition emerges. In general, the decision to patent and the extent of patenting are determined by four factors: a) the distance to the frontier (Aghion et al., 1997) particularly for technology; b) the nature of the technology (Teece, 1986), but with a rural extension in the case of China; c) the specificities of information (Arrow, 1962) that are embodied in a firm’s origins in China; and d) the supporting institutions that co-evolve in that process.Learning proceeds at different levels: that of individuals, firms, industries, and nations.   This dissertation provides an industry-level perspective on learning and innovation-based technological advancement.