Innovation or Imitation? - An Exploratory Study of Bandit Gadgets Made by the Chinese SMEs

China has been known as the paradise of counterfeit consumer products from designer clothes and luxury watches to music CDs and movie DVDs. In recent years, an emerging trend of bandit products ("Shanzhai" in Chinese) especially in the consumer electronics area indicates that there might be something more than just copying. There have been ongoing controversies about the legitimacy of the bandit gadgets. This paper explores the current phenomenon of prevailing bandit gadgets from a theoretical perspective. Drawing upon the theory of innovation and Resource-Based View, this research intends to answer the following questions: Can bandit gadgets be considered a form of innovation? Under what conditions can bandit gadgets be beneficial for the long-term performance of the SMEs in China? The paper consists of the following sections. The first section will introduce the background of the Shanzhai phenomenon. Literature on innovation and imitation will be reviewed and applied to the phenomenon of interest in the section that follows. The third section will discuss the relationship between intellectual property and the bandit gadgets. The paper concludes with an expectation of benefits and/or hindrance bandit gadgets may have on the long-term performance of SMEs in China and a discussion of future research directions.