Disruptive Innovation And The Construction Of International Competitive Advantage About Chinese Manufacturing Industry

Manufacturing is one of the important pillar industries. In industrialized countries, about one quarter of the population engaged in the manufacturing industry, and seventy percent to eighty percent of the material wealth produced by manufacturing sector. In Chinese national economy, manufacturing has occupied a pivotal position. In recent years, with Chinese economy merging into the world economy, Chinese manufacturing develops rapidly with scale and international competitiveness rising continuously. However, according to the status quo of manufacturing, China is not a strong but a large manufacturing country. The reasons lie in the following aspects: products with low-technology, the vital parts and technology depending on import and competitiveness coming from the cheap labors and materials. Latin-America developing history indicates that low cost of production factors cannot form sustainable competitiveness. In fact, the low-cost advantage of our production factors is disappearing with the development of our economy. So how to construct sustainable competitiveness is vital for our country to develop from large manufacturing country to strong manufacturing country.It has become consensus that"catching-up-and-surpass strategy"should be carried out through innovation in China. The experience of Japan and South Korea tells us that improving innovation capability of industry is the inevitable way to form sustainable manufacturing competitiveness. However, as a developing country, whether can accomplish the"catching-up-and-surpass strategy"or not largely depends on innovation strategy and developing path. During the past, the sustaining strategy of "import-assimilation-re-innovation"was regarded as basic strategy which was suitable for the developing countries. But with the coming of knowledge economy era, the second-mover advantage of developing countries is weakened by the rapid speed of technology update and patent protection reinforced. The technology gap between developed country and developing country becomes larger.Since Christensen, C.M.,the professor of Harvard University, has offered disruptive innovation theory, many attentions coming from researchers and practitioner focused on this theory which has become the hot spot of strategy management and innovation management in recent years. Disruptive innovation theory reveals the general law of industry development. The improvement of industry technology is that alternation development between sustaining innovation and disruptive innovation. The characters of non-competition and overthrow during the development of disruptive innovation enable the leading business in the mainstream market to respond hardly. While disruptive innovation makes the famous company disappearing, it also provides the surpassing chance for the new entrant. In view of characters of innovation in the above, some researchers began to realize its special value for the developing country. We catch the developing trend of this theory, applying the disruptive innovation to guide our manufacturing, by which intends to explore the new way to improve Chinese manufacturing competitiveness.Primary contents and research conclusion are summarized as following:(1) Summarized the existing theory. The paper introduced the theory of disruptive innovation and the theory of industry competitive advantage, and made a brief comment about these two theories. The paper contrasted the ideas among the different researchers from concept, characteristics, the barrier of implement, and the ways of carrying out, then pointed out the drawbacks of the existing theories and made expectation about the developing trends in the future. In parts of industrial competitive advantage review, the papers introduced the concept, the main ideas during the different developing stages, the evaluation and the progress in China.(2) Researched on mechanism of disruptive innovation, the formation of industry competitive advantage and the different effect to the industrial international advantage resulting from sustaining innovation and disruptive innovation from the angle of disrubution of international trade benefits. The paper researched the mechanism from aspects of technology and business model, then summarized the source of industry competitive advantage, and introduced the analysis framework offered by Michael E. Porter. The formation mechanism of industry competitive advantage, the ways and the mechanism of disruptive innovation affecting industry competitive advantage were also studied. From the angle of distribution of international trade benefits, the paper researched the effect resulting from different innovation strategies, analyzed the reason of"comparative-advantage-trap"formation, studied the changes of production benefits and cost benefits coming from sustaining innovation and disruptive innovation. On the basis of the above research, the paper pointed out conditions of carrying out the sustaining innovation strategy and the probabilities of implementing disruptive innovation strategy.(3) Researched the driving factors and their changes about international competitiveness of three types of industries in our manufacturing, and laid the emphasis on the factor of different innovation strategy. The paper analyzed the driving factors of industry international competitiveness in three types of industry (i.e. labor intensive industry, capital intensive industry and technology intensive industry) during ten years from 1995 to 2004 by the tool of panel data analysis. The dynamic variation of driving factors in three types of industry was also studied by comparing the changes during the different stages.(4) The characteristics of innovation on our manufacturing and the choice of innovation strategies. The characteristics of innovation were depicted by two indexes, such as the degree of disruptive in the industry and innovation capability, according to which we put the twenty-eight industry of manufacturing in sequence and classified them, at the same time we researched the innovation patterns corresponding to the characteristic of innovation.(5) Development of disruptive innovation and the construction of our manufacturing competitive advantage. The paper researched the development of disruptive innovation in business and in industry. To business, we researched the factors that affect disruptive innovation and the way of developing disruptive innovation. To industry, we analyzed how to drive the formation of industry international advantage from its affecting factors by developing disruptive innovation. On the base of researching the developing history of our industry innovation policy, the characteristics of our innovation policies were summarized. After researching the effects that six types of industry innovation policies make to the disruptive innovation, this paper studied the key points of implementing policy about how to motivate disruptive innovation in industry from the view of policy constitutor.(6) Case study. In this part, a business case and an industry case were studied. In business case, we researched the experience of developing disruptive innovation in Shenzhen HuaWei Technologies Co., Ltd. In industry case, we researched the Japanese manufacturing, analyzed the important effect of disruptive innovation in the formation of competitive advantage of Japanese manufacturing. The paper pointed out the special historical conditions of developing sustaining innovation and the negative effect of ignoring the disruptive innovation. The paper also pointed out the limitation of developing sustaining innovation, and the necessity and possibility of developing disruptive innovation. By reviewing Japanese manufacturing history, some experiences and lessons were summarized.The primary innovations of the dissertation are summarized in the following:(1) First time, the theory of disruptive innovation was applied to guiding Chinese manufacturing. Disruptive innovation is the hotspot and frontier of the innovation theory and strategy management theory. Although many researchers realized the special value that the disruptive innovation theory was to the developing countries, as an arising theory, more attentions were focused on developing and mending the theory itself. In another aspect, Chinese manufacturing is during the critical history stages. The primary path of improving industry competitiveness and upgrading the industrial structure is to improve innovation capability of our industry. It is critical for us to choose the innovation strategy that is suitable to the characteristics of our developing country and our conditions. So, in a creative way, the paper applied the theory of disruptive innovation to the construction of our manufacturing competitiveness, which was a completely new try.(2) Firstly using panel data analysis to research the driving factors and their variation about three industries of Chinese manufacturing sector. The paper collected the data about twenty eight industries of our manufacturing from 1995 to 2004, applied panel data analysis with STATA software to analyze the driving factors which affected our manufacturing competitiveness, and compared the changing of driving factors during the different stages. The results indicated that the driving factors were different in the different industries and the different stages. So the policy makers should constitute the policy according to the industries and stages.(3) Constructing index of industry disruptive degree, and researching the characteristics of industry innovation. The paper depicted the characteristics of our manufacturing innovation with the indexes, i.e. the disruptive degree of industry innovation and industry innovation capability, then put the twenty-eight industries of manufacturing in sequence and classified them according to their innovation characteristics. At the same time, the paper researched the matching relation between innovation patterns and their characteristics. The results indicated that innovation in most arising high-technology industries and some capital intensive industries showed high degree of disruption, while in some traditional industries the innovation showed more sustaining characteristic. In addition, the innovation capability of most technology intensive industries, some labor intensive industries and a few of capital intensive industry were high.(4) Analyzing the influence that the sustaining innovation and disruptive innovation exert on industry international competitive advantage from the angle of distribution of international trade benefits. According to the characteristic of sustaining innovation and disruptive innovation, the paper researched the influence the sustaining innovation and disruptive innovation on the distribution of international trade benefits. The results indicate disruptive innovation offers the completely different way for the developing country to construct industry competitiveness and accomplish the technology surpassing. Comparing with sustaining innovation, disruptive innovation can avoid the comparative advantage trap more easily, and can provide more chances for the developing country to gain the benefits in the international trade.