Exploring innovation in Shanzhai: the case of mobile phones

Chinese innovation in low-cost, good enough' electronic products has been very active. Such products may be copies of current branded goods that are positioned as straightforward counterfeits, knock-offs, or Shanzhai. In this paper, we argue that this simplistic analysis is inadequate to describe novel approaches to the production of new goods and that a new system of innovation is emerging. This novel innovation system has a distinct set of context specific actors and intra- and inter-firm structures that have aided the technology innovations and the development of new business models. This paper employs a case study method and uses qualitative data to explore how innovations emerge in new mobile technologies and the innovation system that supports their emergence. It examines the Shanzhai mobile phone industry as a case and provides a first attempt to map the innovation system that has developed. The results suggest that the distinctive characteristics of the Chinese innovation system contribute to the innovations around the product and the production processes. It further confirms the suitability of applying the innovation system approach to Shanzhai phenomenon, and explores new forms of innovation dynamics. The paper concludes with an initial agenda for further research in this area.