Modes of technological leapfrogging: Five case studies from China

J. Eng. Technol. Manage. 28 (2011) 93–108

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Modes of technological leapfrogging: Five case studies from China Dezhi Chen a,1, Richard Li-Hua b,*,1 a b

Antai College of Economics & Management, Shanghai Jiao Tong University, Shanghai, China Salford Business School, Salford University, Greater Manchester M5 4WT, United Kingdom

A R T I C L E I N F O

A B S T R A C T

Article history:

This paper examines the current literature on management of technology (MOT) and stresses the importance of keeping up with the speed of the technological change and the emerging new global paradigms of the business environment. The focus is on the concept and mode of technological leapfrogging, which is an important element of the technology strategy of firms. Based upon the principles of MOT, nine propositions grounded on document-analysis and case study are proposed. Five typical cases of technological catching-up have been selected to illustrate the mode of technological leapfrogging to validate our work. All the case examples have taken place in China. We established ‘‘technological leapfrogging’’ through the analysis of technological innovation theory, and the study of individual and comparative cases, as well as model matching and competitive test of the nine propositions. ß 2010 Elsevier B.V. All rights reserved.

Available online 16 January 2011 JEL classification: 032 Keywords: Technological leapfrogging in China Technology transfer and innovation Leapfrog mode Technology strategy

Introduction Literature review Technology strategy is defined as the patterns of choices that firms make regarding technology, involving the commitment of resources for the appropriation, maintenance, positioning and relinquishment of technological capacity. In the short term, the main function of technology strategy is to recognize the technological resources of company, both internal and external, and identify those that are basic and distinctive. It also involves the translation of the overall organizational strategy into a coherent set of long term instructions for investment for the sub-organizations that are active in

* Corresponding author. E-mail address: [email protected] (R. Li-Hua). 1 Both authors contributed equally to this work. 0923-4748/$ – see front matter ß 2010 Elsevier B.V. All rights reserved. doi:10.1016/j.jengtecman.2010.12.006

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technology development (De Meyer, 2008). In the long term technology strategy encompasses technological capacity building through the acquisition of appropriate technologies, which sustain the company’s continuous success. Generic business strategy is concerned with the establishment of competence building through developing what has been referred to as ‘‘strategic focus’’ or ‘‘strategic architecture’’. Therefore, the important issue here is that the company should make sure that its technology strategy meets its business strategy in order to have alignment of technology and business as a way of achieving success (Li-Hua, 2008). Business success is achieved by those organizations with strong commitment from senior management to innovation through technology and business acumen based on an appreciation of the relationship between technology strategy and business strategy. As an integral part of technology strategy, technology transfer and technological innovation are strategic instruments in creating wealth and prosperity. Managing the accelerated rate of technology development is a universal challenge. Lagging economies can be helped by providing opportunities to increase their independence and self-reliance. Solving the vexing issues of the digital divide can be accomplished in-part by empowering these countries with innovative strategic solutions involving improved adaptation in utilizing technology (Afie Badawy, 2009). In the super-competitive business environment, learning in organizations and knowledge sharing depend on organizational exploration, exploitation and innovation (Sidhu et al., 2007). A technological breakthrough or discontinuity initiates an era of intense of technical variation and selection (Anderson and Tushman, 1990), which triggers a period of ferment in which innovations dramatically, advances an industry’s price vs. performance frontier. ‘‘Catching-up’’ or ‘‘catch-up’’ refers to the relationship of speed and location between the forerunner and the latecomer. It signifies that the latecomer reaches and surpasses its forerunner after a period of time. As it implies semantically, ‘‘leapfrogging’’ refers to a non-continuous advancing mode, in the course of which some phases or steps are skipped. The former contains the latter. However, no distinction has been drawn between these two words in most related documents (Kim, 2001; Lee and Lim, 2001). An absence of stringent scientific definitions and systematic theory on the two leads to inadequate academic research and ineffective guidance on practice. Since 2002, we have launched and focused our research on cases concerning mode, path and strategy of ‘‘technological leapfrogging’’. During the seven years from 2002 to 2008, we have relied on a wide range of consulting and analyzing documents on ‘‘technological leapfrogging’’ (Chen, 1998). A clear definition and the limits of technological leapfrogging, supporting by the intensive study of the current documents and industrial survey, is specified through the method of introspective diversity; Four basic modes of technological leapfrogging are put forward on the basis of principle theory of technological innovation. In this way crucial tenets of technology management in China and insights on technology transfer and technology innovation have been studied and discussed (Li-Hua and Khalil, 2006). The referential importance of our research findings has been demonstrated by scholars who have cited the definitions, modes and strategies that we had advanced. The primary aim of this paper is to further develop the theory on concept and mode of technological leapfrogging through five case studies, and to explore new issues for future researchers. Structure and scope The paper is organized in five sections. The first one is the introduction. The second is subdivided into research methodology and analytical framework that includes a selection of cases, validity of research and steps of analytic work. The third part contains an analysis of the five propositions. The fourth segment contains the actual case studies and testing propositions; we start with the background and technological development process for each case study, followed by cross-case analysis, and finally the examination of all the propositions in both sequential and differential ways. The last section is the conclusion. Research methodology The nature of the study has led to the employment of the methodology of case study (Yin, 1981; Bourgeois, 1988). Conforming to the order of selecting, sorting out and analyzing the typical cases, we

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compare and discuss the cases on a basis of research findings and principles in economics and management science to fulfill purposes of testing, developing or building up new theory (Eisenhardt, 1989). Case selection Considering the fact that individual case studies enjoy uniqueness but lack universality, we have chosen five typical cases from different industries, all of which feature in technological innovation, leapfrogging, catching-up or attempts to catch up with the forerunner. The five cases and their background are nationally well-known, and have served as materials in many studies. Research purpose determines the selection of cases. Therefore, replication principles are followed in case selection to meet the validity target. 1. The technological leapfrogging mode adopted by Chinese Language Laser Typesetting and Vimirco Corporation meets the requirement of Literal Replication. These two cases are used to repeatedly test the definition of technological leapfrogging, and the proposition that technological leapfrogging in technique and products could only be realized when an enterprise adopts selfinnovation and improves its independent technological innovation capacity greatly enough to catch up or surpass the leading corporations in its industry. In addition, both cases belong to the same industry. This allows them to be applied in the replication test of another proposition that there exists opportunity for technological leapfrogging and a new technology – economy paradigm in emerging industries, and technological leapfrogging or catching-up is likely to be implemented through self-innovation.1 2. Being another pair of cases for Literal Replication, Shanghai Bao-steel Group and Shanghai Highly (Group) are used in the replication test of the proposition that technological catching-up could be carried out when an enterprise follows the pattern of in-draught-assimilation-innovation, adopts self-innovation and improves its independent innovation capacity. This series of acts is to be performed in the premises in which the enterprise has enough dominant/controlling power. Besides, since the two Groups belong to traditional industry, and both of them resort to introduction for developing technology, their activities and consequences are different from that in (1). This conforms to the principle of theoretical replication. 3. Strictly speaking, the cases of Shanghai Automotive Industry Corporation (Group) and Shanghai Air Line Co., Ltd. represent those whose failure is due to the breach of agent’s will in its early stage of technological development. The two meet the requirements of both Literal Replication and theoretical replication. On the one hand, these two businesses hope to play the role of assembly and processing through cooperation and joint venture, and to exchange large domestic market with advanced technology. Unfortunately, having no access to controlling power, both the market and the technology fail them. It is even worse that their domestic self-innovation capacities are lost too much to remain on the same level as in the past. On the other hand, compared with the cases in (2), these two are of the characteristic of theoretical replication. 4. Embedded cases and validity. On analyzing and testing the propositions, we have also chosen such embedded cases of technological catching-up in Korean Mobile Memory Techniques, and Automobile Industry, and Japanese Automobile and steel Industry, etc. These well-recognized typical cases serve to supplement and enforce the validity of the propositions. Validity of the research With a view toward ensuring internal validity, all of the cases cited in this paper are typical cases regarding the technological catching-up or leapfrogging in some of China’s well-known enterprises. Apart from the information obtained officially from the companies concerned, the rest of the information is gained through thesis and public reports published. In addition other methods of 1 It refers to independent innovation without relying others. In an appropriate Chinese term, it may be referred to ‘‘innovation with Chinese characteristics’’ or ‘‘zhizhu chuangxin’’.

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research were employed to enhance external validity. First, similar cases are cited for embeddedanalysis. Second, some well-rounded theories are applied in evaluating the results of case-study. Theoretical background and establishment of the propositions The ‘‘China phenomena’’ is changing the knowledge balance of the world. Chinese business executives are shifting to the international business model. Western countries in particular are carefully following up on the development and change of China’s technology system and innovation policy. Attention is also drawn to China’s ambition of becoming ‘‘an innovation-oriented country’’ by 2020 and a ‘‘world’s leading science power’’ by 2050. In other words, China’s leaders aim to have the country transformed into an innovation-oriented society rapidly. After heated debate on whether China’s technology strategy of obtaining technology by sacrificing its market faced some failure, Chinese enterprises are to becoming less reliance on foreign technology (Li-Hua, 2008). For any innovation-aspiring country with huge market potential the following perspective by Badawy is very fitting. ‘‘The emergence of innovative products is market-driven.’’ Capturing value is a major challenge facing technology industries globally. The success rate in the implementation of new technology and the development of new ideas for its application is an organizational challenge. Cultural differences play a pivotal role in determining the effectiveness of the process of technology transfer. Therefore, technology transfer, its application, modification, and utilization have more influence and positive impact on evolving/developing economies. In addition the following definition is all encompassing of the whole Technology management process. The technology management process has been defined as ‘‘the process of effective integration and utilization of innovation, strategic, operational and commercial mission of an enterprise for gaining competitive advantage’’ (Afie Badawy, 2009). As a matter of fact, technology management and transfer between developed and developing countries entail strategic significance in science and technology capacity building. However, developing countries, such as China, have to understand explicitly that ‘‘real core technologies can not be purchased but can only be achieved by developing ‘indigenous innovation’.2 Furthermore, as knowledge is a key to control technology as a whole, explicit knowledge can be readily transferred while the channel of tacit knowledge transfer is often blocked (Li-Hua, 2004). Therefore there is a growing need to consolidate the technological capacity building through technological leapfrogging and developing an appropriate strategy of technological innovation. From imitation to innovation For latecomer nations like China lagging behind technology forerunners, no doubt technological learning is important. Learning means the process by which managers and their firms acquire the contents of the ‘‘black box’’; namely, the knowledge and capacities by which inputs are transformed into economically and competitively valuable resources that support national growth and development (Hobday, 1995). In the Chinese context, Xie and White (2006) argue that the Chinese business paradigm has been from imitation to innovation. On the one hand, technology transfer, adaptation, reconfiguration with slight modification of externally developed technology is regarded as fundamentally imitative in nature. On the other hand, a firms’ internal technological development of any new technology, resources and capacities involves what we term creative activities or innovation. Another researcher, Badawy, viewed the process of ‘‘imitation to innovation’’ in a similar perspective. New technologies are being developed and existing technologies are being modified or discarded due to the emergence of disruptive-technologies Technology advancement and modifications develop incrementally. Encapsulated in new forms, countless innovation projects are mere adaptation, reconfiguration, incorporate slight modification, and/or re-branding of existing technology. Technology-driven industries create changes through disruptive innovations that are designed to improve performance and/or gain a larger industry share (Afie Badawy, 2009). 2 This is quoted from the remarks of Hu Jintao of President of China and Chinese Communist Party General Secretary, which is another expression of self-innovation.

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Furthermore, successful imitation may be the basis for more pioneering and innovative approaches. Innovation is defined by De Meyer and Garg (2005) as the economically successful introduction of a new technology or a new combination of existing technologies in order to create a drastic change in the value/price relationship offered to the customer and/or user. The two activities may require fundamentally different mindsets, behaviors and organizational capacities. However, the challenges to shift from imitative to innovative are not trivial. Concept of technological leapfrogging and catching-up ‘‘Technological catching-up’’ refers to the latecomers developing continuously and rapidly by imitating the forerunners and to finally catch-up or surpass the forerunners within a short period of time. ‘‘Leapfrogging’’ means that the latecomers advance more rapidly in a non-continuous way and during the process of catching up some phases or steps are skipped. Socete (1985, 1989) puts forward the term ‘‘technological leapfrogging’’ after analyzing the technology-economy paradigm in the emerging industrial countries. He believes that the latecomers can realize their technological leapfrogging by way of incessant imitation and innovation. On studying technology forecasting, Sharif (1999) points out that the underdeveloped countries could adopt the mode of technological leapfrogging in their integration into the world economy. This means ‘‘leapfrogging’’ from one S-curve to another. After studying the technological leapfrogging phenomena in such industries as D-RAM chip, Automobile, Mobile phone, Electronics and PC in Korea, Lee and Lim (2001) discover two modes of technological leapfrogging – intergenerational leapfrogging among different technology curves and stage leapfrogging in the same technology curve. Judging from the nation-level, Xu (2002) points out that ‘‘technological leapfrogging’’ refers to learning from the developed countries, integrating self-innovation and foreign advanced technology, jumping over some phases of technological development, directly implementing and developing new technology and product, and establishing superior industry so as to enhance the national competitiveness and technology capacity’’. Yuan (2002) believes that technological leapfrogging involves self-innovation, realization of ultimate innovation, and original intellectual property rights. Sun holds that comparing with the ladder of technology development, technological leapfrogging is a non-continuously elevated quality change. As a matter of fact, from the perspective of phenomenon or meaning, ‘‘leapfrogging’’ refers particularly to the technologically latecomer’s catching up with or surpassing its forerunner in the mode of non-continuous technological advancement. With the help of the introspective diversity method in semantic terming, we further define technological leapfrogging as a series of activities taken by the latecomer in technology for the purpose of catching up or surpassing its forerunner as illustrated in Fig. 1. Put it differently, it is the non-continuous technological advancement among different technological curves, taking break-

[()TD$FIG]

Fig. 1. Differentia analysis diagram for technological leapfrogging.

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through in technological self-innovation as core approach. Therefore, the propositions on the term of technological catching-up and technological leapfrogging could be put forward as follows: Proposition 1. For the purpose of quickly catching up with the forerunner in technology, the latecomer who advances continuously may follow wholly or skip some stages of the technological scheme employed by the forerunner. If its technological self-innovation capacity catches up with that of the developed, their activities and results could be termed as technological catching up. Proposition 2. When skipping over directly the currently advanced technology held by the forerunner, if the latecomer can research and develop a more advanced and totally new one, and become a new leader for its independent intellectual property rights and self-innovation capacity, their activities and consequences could be termed as technological leapfrogging. Proposition 3. No matter which mode of technological advancement (continuous or not) the latecomer adopts; provided it could improve independent technological innovation capacity greatly enough to exceed and surpass its forerunner, their activities and consequences could be termed as technological surpassing. Elements affecting technological leapfrogging Chen (2003a,b) and his colleagues viewed technological leapfrogging as a complex system consisting of seven elements as information, knowledge, technology, talents, funds, market and management. If we categorize knowledge, information and experience into a set of talents, facilities and expenditures into a set of funds, then these two sets could serve as dominant factors for development of the system, whose core is to advance technology for meeting market demands (Chen and Chen, 2006a,b,c). No firm could assume a role of forerunner in technological innovation capacity by relying exclusively on policies of encouraging innovation and some essential social system. It also needs to increase the investment in technological innovative talents (Barro, 1997). Research shows that owing to their shortage in human resources and infrastructure, the least-developed nations are located in Africa to the south of the Sahara, they fail to catch up with developed counties. The technological gap between the different regions widens more and more (Dowrick and Gemmell, 1991). The Human Capital standard of a developing country determines its capacity for imitating advanced technology of the developed (Zhou and Dai, 2003). Government takes a decisive role in the course of technological catching-up. Its primary function lies in the establishment of an effective institutional arrangement, the improvement of market environment, and in the guidance and protection of technological innovation. Furthermore, a government’s interference and direct intervention in R&D can greatly help its firms and industry in its adoption and realization of technological surpassing (Gover, 1993). As established previously, an appropriate technology strategy no doubt contributes to achieving technological surpassing. The above research could be summarized in the following proposition: Proposition 4. Under a relatively clear background of technological developments, and market demand elements such as the availability of funds, capable talents, and government support, the ability for catching-up increases. When government support is available, we could foresee the possibility of technological leapfrogging or surpassing increasing. Based on the quality of human capital and financial resource, launching the mode of technological innovation and design an appropriate technology strategy can be accomplished successfully. Window of opportunity and the basic mode of technological leapfrogging Both theoretical study and practical experience demonstrate that the introduction and evolving periods of technology serve as two windows of opportunity for the realization of technological surpass (Sood and Tellis, 2005a,b; Chandy and Tellis, 2000). At the embryonic, introductory and early stage of technology development, when the technological manipulator is yet to appear, the latecomer sets out from the same starting point as the forerunner. This presents the latecomer both opportunity and challenge. On the one hand, it entitles it to an opportunity to surpass. On the other hand, it also means

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no ready-made technology is available for purchase. Thus, for the realization of surpassing the forerunner, the latecomer could resort to nothing but independent R&D and self-innovation. Chen (2003a,b) holds that in the emerging industry, it is more likely for the latecomer to launch its technological leapfrogging activities through self-innovation, and to make it come true by combining self-innovation and cooperative innovation. In other words, it is hard for the latecomer to be wellequipped with sufficient self-innovation ability to surpass the forerunner at the start of its catching-up activities. As long as adequate ability is acquired, namely, such activities can be set out, realization of technological catching-up in the end will be achieved if the latecomer works in line with the constraint of funds and talents, speeds up its technological advancement by means of technological cocorporation, and gradually enhances its self-innovation capacity in the course of its technological catching-up or leapfrogging. Hence, one more proposition could be raised as followed. Proposition 5. When an industrial technology is at the embryonic or introductory stage, there is no technological manipulator. If the underdeveloped possesses enough talents and capital resources to start its independent R&D, and if the market needs the technology and the firm gets government’s approval and support, technological catching-up and/or leapfrogging can be achieved by taking self-innovation as major resort, and by integrating cooperative research with the innovation mode in the process of technological development. The technological forerunner in the developed organization tends to transfer technology to the less-developed when the technology comes to its later maturity stage or begins to decline. The latecomer can introduce the technology through technology transfer or joint venture operation, quicken the speed of its technological advancement and realize its technological catching-up by way of imitation, assimilation and the innovation of technology. In other words, simple imitation through technology transfer or assimilation or modification of foreign technology is not enough. Through technology transfer, a firm will not achieve technological catching-up until it gradually cultivates and advances its ability for self-innovation. In the meantime, when a technological forerunner transfers an out-dated technology, it launches the R&D for a new one. Therefore, on introducing such technology, the latecomer should at best keep up with the developed through technology driven innovation so as to catch up. But it is far more difficult to realize technology surpassing. However, the latecomer in traditional industries can realize its technological catching-up through the designing of an appropriate technology strategy utilizing imitation, assimilation and innovation of technology. Proposition 6. When an industrial technology has come to late maturity, the forerunner will plan to gradually quit its application into production and processing, and to move to a higher level or transfer to other areas. If the latecomer is lacking independent R&D and industrialization implementation ability, it can import the technology by market transaction. And if an enterprise holds shares and has the controlling power over technology development, it can help its own independent brand realize technological catching-up and arrive at the standard of the forerunner by means of joint venture and OEM, and can exchange limited market for such technology advancement as technological assimilation and cooperative exploitation, etc. Though an industrial technology has come to ripening phase, if there is still space for selfperfection, that is, the late ripening or fading stage is yet to arrive, and if the technological product is still in the ‘‘cash cow period’’ of the whole marketing life-circle, the forerunner will hold close control of the technological platform, especially when market demands keeps expanding. Under this circumstance, it is likely that an enterprise will import the technology by pure market transaction, to realize technological catching-up and obtain leading position in the global market by means of imitation, assimilation and innovation of technology. If the enterprise does not hold shares, nor take an initiative in R&D and technological innovation in a joint venture, it will lose more interest and assurance in its ability for independent R&D in the process of pure OEM, and get satisfied easily with being merely a manufacturer whose profits come for selling labor force, natural and market resource. In this case, the latecomer will not only fail in achieving technological catching-up, but also forfeit its industrial technology for good. Proposition 7. When an industrial technology has reached its ripening period, but not at later stage, if an enterprise imports it by pure technological trade, and assimilates it afterwards, the latecomer may realize technological leapfrogging on basis of its growing self-innovation capacity.

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Proposition 8. When the latecomer obtains technology through technology transfer or by means of joint venture, it may realize technological leapfrogging if it has absolute controlling power, and achieves assimilation and innovation of technology; if not, it will fail in technological leapfrogging. In line with the theory and actual operability principles of technology innovation, as established previously, we categorize technological leapfrogging into four modes: independent leapfrogging, introductory leapfrogging, cooperative leapfrogging, and M&A leapfrogging. In real operation, they may work in an alternative or repeated way, and always advance helically around its principle target axis. Theory analysis and actual phenomena show that technological leapfrogging or technological catching-up may start from one or two modes mentioned above. But the final achievement of leapfrogging will not be obtained until independent technological innovation is adopted. Import and M&A may enable the latecomer to manufacture high-leveled products, but it will not help to enhance technology innovation capability. Proposition 9. No matter how an enterprise starts, which mode it may adopt in the course of technological development, technology transfer will not take place without knowledge transfer as knowledge is a key to control technology as a whole. Explicit knowledge could be readily transferred and monitored while the channel of tacit knowledge transfer is often intentionally blocked. Therefore core technology could not be purchased without innovation. However, an appropriate technology strategy and IPR framework can help ensure confidence and address the un-blocking of tacit knowledge transfer between the transferor and the transferee. In summary, independent technology innovation serves as the road leading to successful technological leapfrogging and catching up. Grounded on the nine propositions listed above, the following part focuses on the analysis and validation of the propositions centered on the five cases. Case study and validation of the propositions Introduction of the cases Case 1 – Chinese language laser typesetting In 1975, a young scholar named Wang X., who conducted major research over the past decade, proposed to improve on the invention of a fourth-generation laser typesetting system, surpassing Japan’s second-generation optical designation and the third-generation CRT designation. In September 1976, the program was brought into the 748 Project, sponsored by Chinese government. Wang and his six colleagues in Peking University set up a scientific and experimental team and launched the basic research. With the help of the Physics Department, the core technology of Chinese Language laser phototypesetting was invented, and the first sample machine of digital precision phototypesetting came out. This invention obtained 1 patent in Europe and 8 patents in China. With the support of Chinese government, Wang X. and his colleagues started to cooperate with Xinhua News Agency and Wei Fang Computer Int. in the development of technology application. Huaguang machine of types I, II, III were launched, respectively, in 1979, 1983, and 1986. In December 1987, Economic Daily began to use the laser typesetting technology in its word processing. This milestone witnessed that China’s Printing industry had bid its farewell to the era of ‘‘lead and fire’’, and entered into ‘‘lighting and electricity’’ epoch. From 1975 to 1987, from the proposition of the project to its industrial application, it took twelve years to realize technological leapfrogging by means of independent and cooperative innovation (Guo, 1994; Min, 1994; Wang, 2000; Cai and Wang, 2002). Case 2 – Vimirco corporation Deng and three young people received their doctoral degrees in the USA and worked respectively in the R&D department of world-renown companies like IBM, Sun Microsystems, and Intel. Having made a technological competition and market forecasting analysis, they found that companies like Intel had the monopolistic control in PC CPU, and Samsung in memory storage device. In order to avoid competing directly with such monopoly, they made the decision to take digitized photography as a breakthrough for technological catching-up. Because this technology has a vast market, an absolute

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monopoly had not yet taken shape here. Helped by the fact that the Chinese government gave strong backing to the development of chip industry in policy, they returned home in 2000 and launched the Vimirco Corporation. The ‘‘Starlight China Chip Project,’’ serving to develop digital multimedia chips has been supported by the Ministry of Science and Technology, the Ministry of Information Industry, the National Development and Reform Commission, the China Association for Science and Technology and the Beijing Municipal Government. Dedicated to self-innovation, Vimicro has successfully launched a series of products into domestic and international markets, targeting fast-growing application fields such as computer, broadband, mobile communication, and consumer electronics. Vimicro’s chip solutions have been adopted by multi-national companies such as Samsung, Philip, HP, Fujitsu, and Lenovo. Till the end 2005, Vimirco has obtained over 400 patents, and its products accounted for 35% of the international market share (Deng, 2002; Ji, 2006; Tao, 2005). Case 3 – Shanghai highly (Group) Shanghai Refrigerator Compressor Co. Ltd., a predecessor of Shanghai Highly (Group), was lagging ten years behind by the developed countries in that its technology in 1990s could only live up to the international l standard of late 1970s. Being short in the independent technology innovation capacity, it had to rely on the leading companies. In 1993, by establishing a joint venture, the company imported from Japanese Hitachi, Ltd. the technology of 1990s and started the OEM (Hitachi) of air conditioner compressor. In 2000, the Chinese capital partner was renamed as Shanghai Highly (Group). Targeting on setting up its own core technology, the company dispatched technical talents to Japan and USA, and invested in a national center of technology development and a national approval laboratory. Having worked closely with its Japanese partner, highly set out its independent R&D in 2002. By 2004, the company had won 69 patents of core technology, contributing to the successful conversion from OEM to OBM. It became the third largest company in the world for its production and sales volume (Ge, 2003; Shen, 2004; Li, 2005; Xu and Hai Li, 2004; Zhong, 2003). Case 4 – Shanghai Bao-steel Group Bao-steel Group Corporation (hereinafter as ‘‘Bao-steel’’) is one of the top steelmakers in the world. Its independent innovation capacity benefited from large-scaled technological introduction as well as integration of manufacture, learning and research. On constructing the first two phases of its Project (1978–1991), Bao-steel had imported technology, equipment and process that best represented firstclass standard of steel manufacture in Japan, USA and other European countries in 1970s and 80s, among which including technology know-how and utilization right for hundreds of patent technology. Targeting on catching up with and surpassing world leading technology, the company imported high-technology in the third phase, adopting totally 243 new technologies, process and equipment, 158 of which belonged to world advanced level. Taking steel-making for instance, the company has signed 35 equipment introduction contracts and 42 accessory introduction contracts with 31 foreign companies from 7 nations. And in 1999, Bao-steel ranked No. 3 in the list of the most competitive steelmakers in ‘‘Key to Steel’’ (Yan, 2004; Zheng, 2005; Zhou, 2004; Li, 2003; Wang, 1996; Zhao, 1995). Case 5 – SAIC Motor/Shanghai automotive industry corporation (Group) Shanghai automobile industry started in 1953. Since then, many people had been engaged in selfdevelopment and launched successfully the Shanghai brand car in 1958. In the early 1980s, authorized by Chinese government, Shanghai Automobile Industry set out its journey to introducing foreign capital and technology for producing world leading automobiles through joint venture. SAIC had jointly established an automobile company with Volkswagen and GM (General Motor Corporation), producing cars in form of OEM. At the same time, manufacture and the development of Shanghai Car was abandoned. Since foreign partners controlled technology and technological development of the joint venture, SAIC lost little by little its ability and expectation in respect of automobile R&D. In 2004, SAIC organized and established SAIC Motor, built up its own R&D team. Having been rejected by Volkswagen for demanding to purchase the technological platform of Santana whose operation had been suspended, SAIC Motor purchased from Rover (Britain) the intellectual property right for

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technological platform of its Model 25 and Model 75, and launched Roewe brand car in October 2006 (Liu, 2000; Lei, 2003; Li and Gu, 2007). Discussion and analytical results Initial status and the opportunity of surpassing Case 1 and Case 2 have been supported by the Chinese government. At the beginning of the projects, the research investigators were equipped with as an independent R&D team and received relatively sufficient initial funds. Since the technology in Case 1 a milestone was accomplished in China’s printing industry. In Case 2 the technology is in its preliminary introduction phase, they both have access to the surpassing strategy (Yuan, 2001). The two cases are alike in having vast market, and the possibility for realizing technological surpassing by means of self-innovation. Cases 3, 4 and 5 are state-owned enterprises in traditional industries, and are supported greatly by the government in conducting technological catching-up. They are alike in having big market demand for technology development. Shanghai Highly (Group) in Case 3 develops from the former Shanghai Refrigerator, where R&D talents for interior air conditioner compressor are in short supply. The plant depends mainly on the government allocating R&D funds. Despite this, it was still provided with a good technological surpassing opportunity because it started in the late ripening period of industrial technology, when the developed countries were busy transforming their technologies (Yuan, 2001). The Technology and Product of iron and steel industry is part of national strategy, and high added value iron and steel products enjoy enormous market demand at home and abroad. Therefore the Chinese Government has paid great attention to the technological development of Shanghai Bao-steel (Case 4). So the company has been relatively rich in science and technology development funds. The technological level and ability of Shanghai Automobile Industry in Case 5 in the 1980s was lagging about 20 years behind the developed countries. Not only did it lack R&D ability, the industry also badly needed large amounts of financial capital to improve its capacity for Automobile Design, R&D and manufacture. However it is hard to solve the problems by mainly depending on government’s allocation. Both Case 4 and Case 5 are traditional industries; their technology introduction took place in the ripening stage of the industrial technology, when forerunners in the developed countries were not active in transforming their technology. Therefore, they had a very small technological surpassing opportunity. Process and mode of technological surpassing (1) Starting mode: Since the Firms technological development in Cases 1 and 2 met the demands for independent R&D in aspects of both talents and funds, they followed a new strategic mode of selfinnovation. While in Cases 3, 4 and 5, the Firms chose to import foreign technology for the absence of self-innovation ability at the beginning. Both Case 3 and Case 5 imported overseas technology and capital in a form of joint venture. But in Case 3, holding 75% of shares, the Chinese partner controlled the initiative in decision making and technological R&D, and had the right to make more innovations after introducing and assimilating technology. In Case 5, though the Chinese partner held 50% of shares, and technology and brand controlling right was in the hand of foreign partner. Therefore, the Chinese partner had no access to the initiative to the introduction, assimilation and innovation of technology. In other words, once the joint venture was established, the Chinese partner had to put an end to the R&D of the automobile technology. In Case 4, the FIRM purchased technology by pure trade transaction, and thus could decide the assimilation and innovation of imported technology. (2) Mode transformation: Starting in the mode of self-innovation, both Case 1 and Case 2 had worked together with scientific research institutes and enterprises in research and application development for preserving the speed of technological development. Meanwhile, with continuous and active backing from government, resources like talents and capital increased more and more. In Case 3, after the joint venture was established, great effort was made to organize science and

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technology personnel to ‘‘learn in the process of manufacturing’’. They sent talents abroad to learn new theories and technologies. They then cooperated with the Japanese partner to research and develop new products. In order to cultivate independent technology innovation, a Centre of Technology was set up in 1997 and more R&D talents and capital were involved in cultivating independent technology innovation capacity. The Bao-steel in Case 4 worked hard in the introduction, assimilation and innovation of technology. At the same time they took an active part in the cooperation with universities and scientific research institutes at home and abroad to rapidly enhance their self-innovation ability. The Shanghai Automobile Industry in Case 5 had planned to upgrade its technology by means of joint venture, and to exchange market with the most advanced technology. However, having failed to control the initiative in technology development; it was dominated and coerced by the foreign partner from the very beginning of their cooperation. The manufacture of the Santana brand car was delayed again and again, ‘‘adding insult to injury’’ for the Chinese partner who had invested significantly in terms of human capital, various resources, financial capital and legal resources. Under these circumstances, authorized by departments concerned, the Shanghai municipal government made a prompt decision to stop the production line of the over-30-year-old Shanghai Brand car, and to integrate all the Shanghai Automobile Industry into joint ventures, going all out for exploring the technology and market of the OEM Santana series cars. Since 2002, when the Chinese government began to draw attention to self-innovation, Shanghai Automobile Industry prepared to research and develop self-owned brand car. However, the Chinese partner was not entitled to the development of new technology in the joint venture, and the automobile production technology platform and R&D practice available had been stopped and abandoned for nearly 20 years. The original accumulation of technology and talents vanished without trace. Thus, self-innovation is so doomed that technology could only be obtained by purchasing. (3) Innovation mode at the end: Both Case 1 and Case 2 adopted an innovation mode for realizing technological leapfrogging or catching-up, and finally reached world leading level and improved their self-innovation ability. In Case 3, it was also the innovation mode and independent technology creativity that helped it to upgrade from OEM to OBM, and realize technological leapfrogging or catching-up. In Case 4, there was almost no large-scaled technology introduction after the project construction coming into phase 3. Instead, it was self-innovation as well as cooperative innovation that contributed to Bao-steel’s ranking one of the tops in the world iron and steel industry. Having been rejected by Volkswagen for its demands to purchase the production line of the Santana whose operation had been suspended during 2002 and 2003, Shanghai Automobile Industry in Case 5 did not give up their efforts to seek other technological platform. From 2004 to 2005, they purchased from Rover (Britain) the technological platform of its Model 25 and Model 75. Thanks to the close cooperation with European technological personnel, the self-owned brand car ‘‘Roewe’’ came out in October 2006. The SAIC Motor was established and listed in the stock market in the end of 2004. Since then the company has set up its own R&D team, built up an Automobile Engineering Research Institute, Shanghai Automobile R&D Center and European R&D center for nurturing its self-innovation capability. Internal validity of the propositions (1) Among all the five cases cited above, only the activities and result of technological progress in Case 1 (Chinese Language Laser Typesetting) live up to the standard of technological leapfrogging. In Case 2, Vimirco Corporation surpassed its forerunners by means of continuous and rapid catching up among same technological curves. Thus its activities and results belong to technological surpassing. The next 3 cases could all be regarded as technological catching-up affiliated with the concept of technological leapfrogging. Their imitation of the technology from their forerunners only resulted in gradual catching-up and coming near in technology standard or in being listed as one of the tops in their own industry. And none of them managed to be the leader, in other words, they all failed in accomplishing technological leapfrogging. This result serves as good evidence for Propositions 1–3.

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(2) Analysis of Case 1 and Case 2 shows that a good chance and potential to realize technological catching-up exists when an industrial technology is at embryonic or introductory stage, provided the latecomer can equip itself with the knowledge and innovation ability to research and develop new technology, find enough R&D funds, obtain government support and meet market demand. Case 3 demonstrates that marginal profits brought by technology become less and less when an industry enters into late ripening stage or early declining stage, and at this time, technological forerunners in developed countries would plan to transfer its manufacturing technology to the underdeveloped. This provides the latecomer with a good opportunity to catch up, that is, the latecomer would be able to realize technological catching-up or leapfrogging once it could dominate or control the initiative in R&D and technology innovation. Technological surpassing cases in the Korean Semiconductor Industry, whose main function was mobile memory technology, started from technological introductory stage. And its technological surpassing was achieved with the help of government’s support (Cho, 1998; Kim, 2001). Consecutively technological leapfrogging and advancements were achieved in the U.S. video game industry (Schilling, 2003) while Ratliff (2002) describes NTT MoCoMo and its i-mode successful experiences in technological advancement in Japan. This result withstands the test of Propositions 4 and 5. (3) All the cases analyzed in this paper are common in their receiving direct government’s support or intervention in the process of technological development. Many other cases of technological catching-up or leapfrogging in Japanese and Korean industries also serve as evidence for government’s leading role. And this shows that technological catching-up concerning industry or government relates to national policy. Besides government support and market demand incentive, two crucial elements determine the mode of technological advancement. One is how many R&D talents an organization has or could recruit, the other is whether the capital recourse is sufficient to launch or promote technological progress. In addition, effective alteration among different modes according to these two elements also matters. The path of technological advancement in Cases 1 and 2 can be categorized as self-innovation ! cooperative innovation ! technological catching-up and leapfrogging resulting from independent innovation mode. While in Cases 3 and 4, short in R&D talents for independent innovation, the two companies took the path of technology introduction – cooperative research – catching up with the forerunners by means of self-innovation. In Case 5, the company failed to acquire the real self-innovation ability, though it developed successfully its own brand car through cooperative research, M&A of intellectual property right and R&D talents. The technological catching-up in Korea’s Semiconductor, Steel and Automobile industries could also be concluded as working in line with its own R&D ability, and taking the path of introduction ! cooperation ! and self-innovation. This analytic result supports Proposition 4. (4) Companies in Cases 3, 4 and 5 all belong to traditional industry, and they embody replication and conspicuous competitiveness. First of all, both Case 3 and Case 5 imported advanced technology by means of joint venture. They produced OEM products and sold in their domestic market, hoping to enhance the Chinese partner‘s self-innovation ability by exchanging technology with market and to achieve technological catching-up or even technological leapfrogging. In Case 3, technological personnel from the Chinese part had a quick and good command of the imported technology by leaning in courses about manufacturing, and made themselves ready to cooperate with their foreign colleagues. After further cooperative research they mastered the orientation and principles of technology development in the subject domain and enhanced self-innovation ability at speed. Since the establishment of the joint venture, it took the company a decade to transfer from OEM to OBM. By means of exchanging technology with market, the company finally realized its technological catching-up and topped itself both in intellectual property right and in international market share. This result accords with Proposition 6. Vastly different from Case 3, SAIC is Case 5 it abandoned its own independent development activities after building up the joint venture and engaged itself in manufacturing and marketing of OEM cars for their foreign partner. And in 2004, to their surprise, they were rejected by Volkswagen for demanding to purchase the technological platform of Santana whose operation had been suspended. The company sacrificed its market but failed to get technology. They started from the same mode as Case 3, but resulted in a quite different way. This could be explained by the fact that the Chinese

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partner in Case 3 held 75% of shares of the joint venture, and could assimilate the imported technology according to its own will. It managed to learn in the process of manufacturing, and control the initiative in technology innovation. While the Chinese partner in Case 5 had no access to absolute controlling power, nor could it decide technological assimilation and re-innovation. Exploration of new products of the joint venture was held in the hand of foreign headquarters’. Even worse, they had abandoned their own autonomous production line once the joint venture was set up, and thus lost the base for cultivating independent technology innovation capability. The results of Case 3 and Case 5 verifies Proposition 8 in a competitive way. Shanghai Bao-steel Group in Case 4 obtained sophisticated technology from developed countries by means of pure trade transaction. Grounded on this, the company reached world leading standard and realized technological caching-up by following the path of assimilation, cooperation and independent innovation. This verifies Proposition 8. The mode of innovation helped the first 4 cases achieve catchingup, leapfrogging and chasing after their forerunners. By failing to cultivate its self-innovation ability, SAIC in Case 5 did not realize its technological catching-up. This verifies Proposition 9. External validity of the propositions Cases from other countries Companies in South Korean Automobile and Semiconductor industries realized their technological catching-up and surpassing by adopting the mode of self-innovation. But due to lack of self-innovation capability, Mexico has been serving as the assembly plant for American Ford Motor Company from 1926 till now. The same situation occurred in Argentina and Brazil who had adopted assembling mode in 1950s and 1960s. Mei (2006) believes that only by relying on self-innovation could a firm pursue an independent development. Introducing technology does not equal introducing technological innovation capability, which requires enhancement of knowledge transfer and organizing learning. This shows that SAIC’s purchasing of intellectual property rights from Rover (Britain) by no means equals real mastering of technology in it, nor does it equal possession of the same technology innovation capability. As established previously, the transferee has to be aware of the blockage of knowledge transfer in the process of technology transfer. Managers’ feedback to the propositions MBA students (who are middle and top managers of international companies) of multi-nationals in Shanghai Jiao Tong University were invited to participate in our survey. To ensure the interviewees’ full understanding of our propositions, we targeted 100 department managers, engineers and technical experts in manufacturing industry, who are over 30 years old, having an up to 8 years’ working experience in managing technology and have a minimum of a university degree and a basic knowledge of economics and management science. We handed out 100 questionnaires together with copies of this paper without this part (Managers’ feedback to the propositions) to the interviewees and asked them to finish the reading of this paper and the references concerned in a week’s time, and then mark their degree of approval to the propositions. Should they encounter any difficulty in the process of answering the questionnaire, they were free to consult or discuss with the authors or other experts. We handed out and took back 100 copies, among which 98 were valid. The outcome shows that all the 98 managers agree on the 9 propositions, differing only on the degree of approval to each one (see Table 1). Generally speaking, the nine propositions are approved highly. Among all the propositions, the approval degree of Propositions 1, 2, 3, and 5 reaches up to 90%. And this demonstrates that all the propositions are valid and thus sustain internal and external validity. Research contribution This paper verifies the concept and mode of technological leapfrogging and its strategy proposed previously on the basis of five case studies. All the cases are characterized both by literal replication and theoretical replication. Meanwhile, through analyzing comparative cases the authors aim to construct and develop a new theory. There are four major contributions: (1) verification of the

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Table 1 Proposition approval degree.

Proposition Proposition Proposition Proposition Proposition Proposition Proposition Proposition Proposition

1 2 3 4 5 6 7 8 9

Absolutely agree

Agree

Slightly agree

Disagree

96.80% 93.50% 96.80% 80.70% 93.60% 74.20% 77.50% 83.90% 87.10%

3.20% 6.50% 3.20% 16.10% 3.20% 16.10% 12.90% 16.10% 12.90%

0.00% 0.00% 0.00% 3.20% 3.20% 6.50% 9.60% 0.00% 0.00%

0.00% 0.00% 0.00% 0.00% 0.00% 3.20% 0.00% 0.00% 0.00%

concept. The outcome of the cases proves the validity of the cardinal definition of technological leapfrogging and its implementation possibility. With the help of introspective diversity method, distinct definitions of technological catching-up, technological leapfrogging and technological surpassing are given and differences and connections among the three are pointed out. (2) We argue that no matter how an enterprise starts its business, how it transforms in the process of development, technological leapfrogging or technological catching-up can only be realized when it blazes new trails and when its technological innovation capacities can catch up or surpass its forerunner. (3) Our research also demonstrates and appraises two different settings and consequences for the latecomer to catch up or surpass its forerunner. In the emerging industry, when technological development is in its embryonic or introductory or early development stage, the latecomer will finally catch up with or surpass its forerunner if it processes resources for launching innovation and sets out its activities of catching-up or leapfrogging in an self-innovation way. In the traditional industry, when a technology is in ripening stage, it will be difficult for the latecomer to realize technological catching-up or leapfrogging. Even if it improves self-innovation ability by importing technology, the best result could only be keeping up with the forerunner’s technology. (4) We also intended and aimed to revise and promote the theory of technological leapfrogging and technological surpassing, and to emphasize the cardinal rule of self-innovation ability in research concerned. Conclusion and policy implications (1) When the latecomer runs after the forerunner by imitating its technology, it is possible to catch up with the forerunner. In other words, if it can keep pace with the forerunner in R&D, innovation capability and manufacture technology, then its activities could be regarded as technological catching up. If the latecomer surpasses its forerunner in self-innovation and outperforms and replaces it as a new leader, its activities could be regarded as technological surpassing. While the latecomer is following the technological path taken by the forerunner, if it can reach the forerunner’s technology innovation capability by skipping some phase, its activities could be regarded as leapfrog catching-up. And if it can surpass and replace the forerunner, its activities can be regarded as leapfrog surpassing. If the latecomer chooses to research and exploit new technology which the forerunner fails to work out, and if it can be the first to yield the new technology and apply it into trade through its own creativity, its activities could be regarded as technological leapfrogging. Activities and results of technological progress and technological chasing, caching-up or leapfrogging in a non-continuous way could be regarded as technological surpassing. (2) In China’s technology development and technological catching-up relies mainly on governmental support, funds for R&D and industrialization, as well as personnel in R&D and engineering. When the government’s support continues, the latecomer can evaluate their own resource of talents and capital and choose accordingly the start-up and process modes for technological catching-up. If the capital and talents owned by the latecomer are sufficient to support an independent R&D and technology innovation strategy, it can push forward technological catchingup activities through a mode of self-innovation, adopt cooperative R&D mode in the process according

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to the influence of talents and capital on technological development, and finally fulfill its aim by catching up with or surpassing its forerunner in independent R&D and technology innovation. For organizations and countries with no access to independent R&D and technology innovation, they can purchase advanced technology, and assimilate the imported technology and control the initiative in Reverse Solution Principle and further innovation, they can cultivate self-innovation capability by means of introduction, imitation and cooperative innovation, and realize technological catching-up through their own capacity for innovation. And for others who choose to import foreign technology by establishing joint ventures, if they have absolute control of investment and seize the initiative in the assimilation and re-innovation of the imported technology, and can master the principles of the imported technology by means of ‘‘learning in the course of manufacturing’’, they will be able to enhance their self-innovation capabilities and realize technological catching-up. Otherwise, the latecomer would lose its self-innovation capability for good as the joint venture started and developed. (3) Technology strategy plays a vital role in achieving technological leapfrogging or catch-up. Both technological leapfrogging and catch-up require the commitment of human resources, financial capital, and a strong supportive governmental or leadership which is key. 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