Catching up or being dependent : the growth of capabilities among indigenous technological integrators during Chinese development

The thesis appraises certain key processes – albeit rather limited in number and scope – widely assumed to be associated with assessing the role of technological capability building in developing country (DC) firms. The latter are affected by their DC status on both the demand side (e.g. by rapid growth of the economy via consumption and trade) and the supply side (of technological catch-up etc.). Such broad considerations set the scene for our specific study. In this thesis, the component of technological capabilities that we highlight by studying local integrated product providers is the capability for systemic product development. We argue that the organisational system of industrial firms in DCs plays a fundamental role in their technological learning performance. Here, the developmental context is stressed because we suggest that the knowledge about how to organise effective learning, termed 'social technology', is at least as scarce as the 'physical technology' in such contexts, compared with those prevailing in the developed countries. Therefore, when DC firms shift into a new domain, the organisational systems that they rely on often have to be created rather than simply selected. This may be because, as first-movers in their circumstances, even when they are informed by external sources, they have very little practical experience of carrying out similar actions successfully within their own contexts. Therefore, studying organisational building in their early phase could prove critical for understanding their capability building processes. Empirical studies of China‘s car-making and telecom-equipment sectors over the past three decades are taken to support theoretical exploration in this thesis. Some scholars (e.g. Bell and Pavitt, 1992) point out that, in DCs, the growth of production capacity does not automatically lead to the building of technological capability. The experiences of China‘s car-making and telecomequipment sectors are exactly in line with this point of view. From the mid 1980s, the Chinese government implemented a 'trading market for technology (TMFT)' policy, encouraging its backbone SOEs (State Owned Enterprises) to establish productive joint ventures (JVs) with MNCs (Multinational Corporations). By doing so, policy-makers expected backbone SOEs to undergo a bottom-up capability building trajectory via learning closely from their JV partners. We term these SOEs and their JVs the 'Group-A firms' in our research. Contrary to the expectations of policy-makers, Group-A firms were locked into the manufacturing segment even after twenty years of TMFT practices, and seldom had new systemic products developed indigenously, prior to 2005 at least. On the contrary, the indigenous advance of technological capability building has actually been led by some new entrants. Their development has been independent of the advocacy of TMFT. They relied on in-house developed products from the very beginning after entering the corresponding industries, and succeeded in building sustainable competitiveness. We term them the 'Group-B firms'. By comparing these Group-A and Group-B firms, we argue that there are distinctive differences in organisational learning systems between them. Four components are developed of the concept of organisational learning systems, i.e. the strategic intent, the authority over strategic resource allocation, the pattern of organisational mobilisation and learning integration, and the facilities and institutions for knowledge accumulation. For the latter three components, we succeed in generating a clear contrast between these two groups of firms. We undertake a thorough comparison of authority over strategic resource allocation by studying the constitution of their top committees. As for the patterns of learning mobilisation and organisational integration, we find distinct differences in the scope of knowledge communication of front-line engineers, and relevant institutional arrangements to mobilise, integrate and direct the content of communication. Regarding the facilities for knowledge accumulation and application, the study of their knowledge database building engenders a clear contrast, as well as the institutional arrangements to regulate and promote relevant activities within their organisations. We also discover significant connections between the organisational systems of Group-B firms and their processes of knowledge search, generation and accumulation. Three important mechanisms of new knowledge creation in Group-B firms are examined, namely learning through recruitment, learning through cooperative projects and learning through interaction with customers. Our empirical study reveals that the authority stressing the investment in new product and technology development, the cross-boundary inter-departmental platform of knowledge conversion, the comprehensive knowledge-accumulating facilities, and the institutions backing these components play fundamental roles in shaping these learning mechanisms. Therefore, the organisational differences of these two groups of firms are connected with the differences of these two subsets of firms‘ technological learning performances. Besides, we discuss the social roots of their organisational systems by historically revisiting China‘s industrial system. By doing so, for the research community that focuses on technological learning in DCs, this thesis advocates a shift of research from stressing assimilative processes of firms to giving more emphasis to organisational changes as a centrepiece of studies.