The Competitiveness of Chinese Manufacturing beyond the Lewis Turning Point: The role of Explorative Technology Transfer

This paper considers two case studies of acquisition of Western manufacturing businesses by Chinese firms. It concludes that the underlying technology transfers are significantly different from contractual forms of technology transfers with an exploitation focus. The limited knowledge that was gained through prior technology transfers agreements led Chinese manufacturers to occupy unrewarding positions in their home market, with no prospect for growth and faced with the risk of competitive decline when faced with rising labour cost (i.e. with the advent of the so-called "Lewis turning point"). In order to break out from this 'middle income trap' the case firms used acquisitions and explorative forms of technology transfer that allow them to move away from their constrained strategic positions and to truly compete with other global firms both at home and abroad.