Influencing Mechanism Of Technological Innovation On Cost Leadership Strategy

Chinese manufacturing firms generally adopt the cost leadership strategy(CLS) to participate in international competition, and are at the lower part in the global industrial chain. Although Chinese manufacturing industry is big but is not strong. Now our most important task is to upgrade Chinese manufacturing firms’ cost leadership strategy, and to transform from “MADE IN CHINA” to“CREATED IN CHINA” as soon as possible.From resource-based view, technology innovation is the base of upgrading CLS. To distinguish efficiency-based CLS and innovation-based CLS, probe into the influencing mechanism of technology innovation types on CLS, low-cost innovation motivation on CLS, and compare with influencing mechanism of technology innovation types on differentiation strategy, low-cost innovation motivation on differentiation strategy, will help to find path and driving force mechanism for upgrading CLS, and have important theory and practical significance.From two aspects of technology innovation, using questionnaire survey method, we study the influencing mechanism of technology innovation on CLS. First perspective is technology innovation types. With a sample of 257 manufacturing firms in China, first study distinguished efficiency-based CLS and innovation-based CLS, compared the performance of two CLS types, analyzed the direct influence of process innovation and product innovation on CLS, moderating effect of institutional environment, TMT cognition style, low-cost innovation on relationship between technology innovation types and CLS, and compared the direct influence of process innovation and product innovation on differentiation strategy, moderating effect of institutional environment, TMT cognition style, low-cost innovation on relationship between technology innovation types and differentiation strategy. Second perspective is low-cost innovation motivation. We collect 427 valid samples data, the front part- 200 samples make exploratory and confirmatory analysis, the latter part- 227 samples test the hypotheses, probe into the direct impact of low-cost innovation motivation on CLS, moderating effect of labor institution and environment-resource institution on CLS, and compared relationship between low-cost innovation motivation on differentiation strategy. Research discovered four main conclusions:First, CLS can be divided into two types: operational efficiency as the main driver of efficiency-based CLS, technical innovation as key driver of innovation-based CLS. Operational efficiency strength of efficiency-based CLS is significantly higher than innovation-based CLS;technical innovation strength of innovation-based CLS is significantly higher than efficiency-based CLS. Financial performance, market performance, and overall performance of two types don’t have significantly difference. Overall, the proportion of efficiency-based CLS firms is higher than that of innovation-based CLS.Second, from technology innovation types perspective,firms’ competition strategy is dominated by CLS, and is driven by process innovation as the main purpose to improve manufacturing quality,enhance operational efficiency. From low-cost innovation motivation, we put forward and empirically test three dimension of low-cost innovation motivation–instinct motivation, cognitive motivation and behavior motivation, among them, instinct motivation and behavior motivation have significantly positive influence on CLS. Comparatively, product innovation has higher impact strength on differentiation strategy than process innovation, the correlation between low-cost innovation motivation’s three dimensions and differentiation strategy is not significant.Third, the formal institution does not strengthen the impact of process innovation on CLS, on the contrary, weakens impact of process innovation on CLS. Labor institution does not have significant moderating effect on relationship between low-cost innovation motivation and CLS.Environment-resource institution weakens the impact of low-cost innovation behavior motivation on CLS. Comparatively, formal and informal institution has not significant moderating effect on relationship between technology innovation types and product differentiation strategy. Formal and informal institution has significant negative moderating effect on relationship between product innovation and customer differentiation strategy.Forth, proved the previous found, there are two kinds of TMT cognitive style, analysis and creation, and the strength of analysis is higher than that of creation. TMT analysis and creation cognitive style don’t have significant moderating effect on relationship between technology innovation and CLS. Comparatively, TMT analysis and creation cognitive style do not have significant moderating effect on relationship between technology innovation types and product differentiation strategy. TMT analysis and creation cognitive style have significant moderating effect on relationship between process innovation and customer differentiation strategy. TMT analysis cognitive style has significant negative moderating effect on relationship between product innovation and customer differentiation strategy.Fifth, low-cost innovation has significantly positive moderating effect on relationship between product innovation and CLS. Comparatively, low-cost innovation weakens the impact of product innovation on customer differentiation strategy, and does not has significantly moderating effect onrelationship between technology innovation types and product innovation.Our research finding provides strategic guidance for promoting China’s manufacturing to transform from “MADE IN CHINA” to “CREATED IN CHINA”. First, in the path of transformation,to enhance the technological innovation strength, especially product innovation, transform from "efficiency-based CLS" to "innovation-based CLS", and "continuously implementation CLS in the new industry market". Second, in the mechanism of the transformation, on the one hand, within the enterprise, to enhance TMT creative cognitive style strength, perceive and process information more flexibility and creativity, and at the same time enhance initiative innovation motivation strength; on the other hand, outside the enterprise, to strengthen the construction of formal institution and cultivation of informal institution that will help to TMT creative cognitive style and initiative innovation motivation, enhance labor institution and environment-resource institution that will help to business initiative innovation.Finally, we analyzed its limited and the future suggestion.