Innovative Capability Catch-up Path Of Latecomer Firms In Transition Economy: An Ownership Perspective

This dissertation addresses the issue of latecomer firms'innovative capabilities catch-up in transition economy. Latecomer firm is domestic firm in developing country facing technology and market weakness, with a goal of catching up. Catching up has been an important element in latecomer firm's strategy. Much literature summarize the successful path and model of catch-up by latecomer firm, however, they are largely set in the context of Japan, South Korea, Hong Kong and Taiwan, the context effect research on catch-up in the context of transition economy like China is rarely conducted. Given that the variety of ownership is a major feature of transition economy, this dissertation aims to explore innovative capabilities catch-up by latecomer firms with different ownership. Formally, the overarching research question addressed is:in the context of transition economy, what's the difference regarding path and mechanism of innovative capabilities catch-up by latecomer firms with different ownership? Why?The dissertation contains four studies. First, through a comparative case study approach, using a SOE, SAIC and a POE, Geely, in Chinese automotive industry as cases, difference of the innovative capabilities catch-up path by two firms is summarized, and policy contingency factors are identified. Second, to further refine and elaborate the findings of comparative case study, formal mathematical model is developed. The model is simulated by system dynamics and experiments are conducted under a variety of conditions. Third, to verify the generalizability of findings from comparative case study, based on 367 observations of Chinese listed companies from 2008-2009, the study examines the mechanism through which state share impact innovative capabilities catch-up by latecomer firms and institution's moderation effect. Finally, to provide a thick discription of the process of innovative capabilities by latecomer firm, through single case study approach and using Geely as a case, the study dipicts the coevelution process between innovative capabilities catch-up by a private latecomer firm and institutional environment.The conclusions are as follows. First, the comparative case study of SAIC and Geely suggests, both as latecomer firms, the innovative capabilities catch-up paths and mechanisms are different between SOE and POE, besides, industry policy orientation plays an important part. Specifically, the localization policy exacerbates a vicious circle among innovative capabilities, dependence on MNCs and learning openness for SOE. Without opportunity to build direct linkage with MNCs, POE fortunately gets rid of the vicious circle. This causes a striking contrast in innovative capabilities between SOE and POE, which further leads the policy makers to shift from localization to own-brand orientation. Under the own-brand policy, SOE breaks off the vicious circle. However, as a result of inherent visibility dilemma, SOE has no superiority over POE in catching up of innovative capabilities.Second, Building on the comparative case study of SAIC and Geely in Chinese automotive industry, the simulation study using system dynamics approach shows, POE's entry timing, POE's visibility dilemma (relative to SOE's) and delay time in governmental policy reorientation, each has a nonlinear effect on the innovative capabilities catch-up by SOE and POE. Overall, the simulation analysis suggests that, the earlier POE entries industry, the lower POE's visibility dilemma and the shorter the policy delay time, the more likely catch-up occurs, not only for POE, but also for SOE. More refined analysis reveals some nonlinear features, that is, the effects of these factors are more significant in early and late period than in middle period in the course of entire catch-up process.Third, statistical analysis of Chinese listed companies confirms the negative effect of state share on innovative capabilities catch-up. Further conclusions include: firstly, it's state share rather than state legal person share that influences innovative capabilities catch-up. Secondly, it's the tenure of chairman of the board rather than that of general manager that mediates the relationship between state share and innovative catch-up. Moreover, it's power dependency logic rather than embeddedness logic that operates in the latecomer firm's linkage to multinational corporation. Finally, institutional transition, measured by marketization index, negatively moderates the relationship between state share and linkage to multinational corporations, but not the relationship between state share and executives'firm-specific understanding.Fourth, the single case study reveals that, private latecomer firm's innovative capabilities catch-up co-evolves with the institutional environment. Specifically, in initial phase, POE operates in an illegal institutional environment, adopted a protective oriented competitive strategy and a learning approach of learning by hiring. As a result, POE enters low-end market through reverse engineering. During expansion phase, POE creates for itself a legal institutional environment as a consequence of political strategy implemented in initial phase. Adding some prospective elements in its competitive strategy, and employing learning approach of learning by R&D and technology import in addition to learning by hiring, innovative capabilities witness a qualitative change. Finally, in transformation phase, due to the joint effect of political strategies and capability catch-up of previous phase, POE obtained a supportive institutional environment. With competitive strategy prospective oriented, it learns by international acquisition apart from learn by R&D, resulting in further improvement of innovative capabilities.This dissertation also discusses the contributions of these studies to resource based view and dynamic capability view, institutional theory and institution base view of strategy, literature on latecomer firm's cath-up, and Chinese contextualized management research, as well as the policy implications to localization policy, industry entry policy, trade market for technolgy policy and SOE reform policy, and mangerial implications to SOE and POE's managers.