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Given the most popular understanding of Chinese comparative advantage is their low labour cost, The Source of Innovation in China argues the fundamental source for Chinese economic growth is its innovation. Based on case studies and surveys collected from 600 firms, this book describes competitive advantages of successful Chinese enterprises.



1. The Rise of China: Innovation or Cost Leader

Years ago, when Lee Kuan Yew, the founding father of modern Singapore, was asked in a conference in Barcelona about the innovation of China; he told this story: Lee was then meeting the president of Siemens and he launched the question of which country was more innovative: India or China? Most people, including the Chinese present, were expecting the answer to be India. However, to Lee Kuan Yew’s surprise, the reply was China. Why? The explanation was simple: Siemens had Research and Development (R&D) Centers in both India and China. When a problem was sent to two centers for solution, both came back with results before established deadline. However, the R&D center in China provided several alternatives in addition to the result requested.

Yingying Zhang, Yu Zhou

2. Chinese Innovation in Product, Process and Strategy: The End of Low Cost Era?

Some visionary scholars and practitioners have testified to Chinese innovation as a reality (e.g. Abrami et al., 2014; McKinsey and Company, 2012); although most others are still not giving any credit to the innovation in China yet (Zhang and Olivares, 2012). To start with, we need to look at the strategic evolution in the western organizational theory and also distinguish different types of innovation. In terms of innovation types, one commonly understood radical innovation is a basic scientific and technological invention, which could essentially have a profound impact on human life. Another is organizational innovation, the crucial requirement for a business to run successfully. Different classifications and typologies co-exist, and it can be confusing for readers, seeing these together, to form conclusions as to whether or not China, or indeed Chinese enterprises, are innovative.

Daniel Lemus, Hemin Song, Yingying Zhang, Sylvia Rohlfer, Yajun Wu, Xiaoxi Chang

3. Chinese Culture and Value: Enhancing or Impeding Innovation?

Chapter 2 gives a clear picture of the facts of Chinese innovation, both in terms of invention as patent registration, and organizational innovation as product, process and strategy. Once “China-also innovates” is evidenced as showed in Chapter 1, one may wonder whether that is a generic phenomenon or a specific individual case. It could happen that there are only very few exceptional Chinese firms who innovate. For instance, as we discussed in Chapter 1, only ZTE and Huawei, two Chinese firms, innovate since these two are evidenced by being listed in the top 20 companies in terms of patent registration. Though we provide more examples and innovation data from the Chinese Top 500 Companies, one may still wonder about the many other companies, given the extensive size of the Chinese market and the population.

Stephen Grainger, Hemin Song, Xiaoxi Chang, Mu Tian, Maria Paz Salmador Sánchez

4. Network-based Innovation in China: Typology along with Economic Evolution

Since traditional Chinese philosophy may facilitate innovation, its loosely-coupled networking culture may also smooth progress in a social networking approach for organizational management. As discussed in Chapter 3, the guanxi culture is very popular in Chinese society with emphasis on closed inter-personal relationships and its relevance to social economic activities (Chen et al., 2004). In our opinion, these individualized relationship practices provide a micro-behavior foundation for inter-organizational network-based innovation.

Sylvia Rohlfer, Wenwen Zhao, Verónica Rosendo-Rios

5. People-centric Innovation: Strategic HR Management and Innovation

Earlier chapters explored a broad understanding of innovation in China from different angles. This current chapter focuses on the level of organization in business operation in the corresponding industry, and how an intra-organizational personnel management system cooperates with inter-organizational stakeholders to approach innovation. In this sense, we distinguish the personnel management within an organization and extend this management to inter-organizational relationships, to a broader definition of human resource management (HRM) as Zhang et al. (2009) suggest in order to make HR truly strategic.

Mu Tian, Sylvia Rohlfer, Wenwen Zhao, Adoración Álvaro

6. Innovation Challenges When Multinationalizing: The Source of Innovation

Bregolat (2014) evidenced the ambition of China in science and technology in its second revolution in economic development. This is also considered as one of the principal motives for Chinese firms to internationalize along with resource seeking and market penetration. On the other hand, the great interest in investing in China and attracting Chinese outward foreign direct investment (OFDI) to Western countries and other parts of the world (Alon and McIntyre, 2008), has encouraged many scholars to explore the phenomenon of China’s economy and enterprises. In their attempt to better understand the evolution of systematic knowledge on management and organization in Chinese management, Tsui et al. (2004) extended the literature review on the nature and influence of market transformation on firms and management in China, and concluded that “the original theorizing on Chinese business organizations and management is still in a primitive stage” despite a growing body of literature and the legitimacy of Chinese context for knowledge generation in the global management base (p. 137). The aim of this book is twofold: First, to call the attention of scholars and practitioners to the innovation phenomenon in China; second, to set a sprat to catch a mackerel — that is, our work may serve as a modest spur to someone to come forward with their contributions to future studies on this theme.

Libo Song


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