Patterns of technological learning and Catch-up strategies in latecomer firm: A case study in China's telecom-equipment industry

This paper discusses the development of high-tech industry and the dynamics of technological learning, innovation, entrepreneurship in China through the telecom-equipment industry. The catching-up process in the telecom-equipment industry can be divided into three stages, that is, phone digital switches, the Global System for Mobile communication (GSM) and the third generation mobile communication systems (3G). In order to understand how domestic firms narrow their technological gap in these different stages and how these firms have been influenced by their innovation capabilities to catch up to the multinationals, four case studies will be made use of. The first case shows that the knowledge diffusion from Shanghai Bell and its absorption by public research institutes was critical in the stage of phone digital switches catching-up. The second case in point is concerned with Huawei's outlook on in-house R&D development: it shows how Ren Zhengfei, the founder of Huawei, insisted on constructing the firm from the ground up and relying on its own innovation capability, thus giving Huawei a competitive advantage in later stages. The third case gives a demonstration of how Huawei, a latecomer in GSM, innovate in low-end market and uses its innovation capability to advance in GSM and later became the leader in providing the third generation mobile communication systems and network solutions for operators around the world. The last case illustrates how leapfrogging catching-up has occurred in the development of China's own 3G standard: TD-SCDMA. Our study points out that there are two different catching-up patterns in China's telecom-equipment industry. One is "path-following" catching-up in GSM driven by using new technology in low-end market. The other is "leapfrogging" catching-up in the development of phone digital switches and China's own 3G standard (TD-SCDMA). However, it seems that leapfrogging strategy will meet more challenges and problems than path-following strategy.