Wynn Mode, In The Sector Innovation System

The breakthrough of manufacture of soda was a huge challenge for modern Chinese who still lacked sufficient technical experience in the building of large-scale industries. In view of the lack of innovation resources in modern China, Yunli attempted to use overseas equipments and personnels to fullfill the needs of new industry. Fan Xudong Conglomerate embarked on the road of international cooperation which combined overseas innovation resources and domestic resources to complete the manufacture of soda. Yungli's primary task was to finish the design of factory before the purchase of equipment abroad.Fan Xudong paid unprecedented attention to the technological innovation and scientific research. After the introduction of design of soda factory, Fan Xudong constructed the Golden Sea which was intented to realize the technological innovation in modern China. With the increasing complexity of innovation, Fan Xudong Conglomerate carried out a clear internal division of innovation. The Golden Sea's aim was to complete the study of research problems, while Yungli was to solve the engineering problems. The differents between researchers and technicians from Yungli realized the division of academic and engineering.Domestic manufacturers couldn't afford to provide key equipments required for new industries and the communication barriers associated with high transaction costs were obstacles for corporations such as Yungli which bought a large number of equipments abroad. At the same time, the industrialization of technological innovation couldn't be separated from the support of equipments. In view of the importance of the equipments manufacturing, Fan Xudong built the ironwork which was attented to provide the equipment needed both by Yungli and the Golden Sea. Fan Xudong gradually sketched the outline of sectoral innovation system.During the design of chemical plants, the designers must attach importance to the analysis of raw materials. Duval took into account the localization problems in his design process, he also took into account the speciality which was particular in modem China. But Yungli changed its plan and asked for Monnt to redesign the factory. When the design work finally finished, some unexpected defects appeared. Fan Xudong apparently underestimated the difficulties which his staffs would face. In 1924, the factory couldn't produce high-quality soda ash. Afterwards, Fan Xudong and the engineers were confronted with endless accusations, as well as the severe crisis of confidence from the stockholders. In order to solve the engineering problems, the researchers from the Golden Sea and technicians from Yungli worked together. In the localization process, foreign technical experts and local R&D forces played their respective roles. Localization extended the innovation capability of Fan Xudong Conglomerate.The success of Yungli set a rare example of technological innovation in moder China. The sector innovation system and it's performance proved the ability of Chinese enterprises. However, there are still many problems in the innovation system which was still in it's infancy. The outbreak of new industry was incredibly difficult, Yungli faced the technology, capital, personnel and other challenges. Sector innovation system couldn't be separated from the participation of financial institutions and the importance of capital is no less than that of technological innovation. The chemical industry was a typical capital, technology-intensive industry, enterprises which were dedicated to fullfill their tasks needed necessary capital, technology and national policies of protection. When the manufacture of soda was finally succeeded, Fan Xudong had a strong desire to expand the factory's production to meet the needs of the emerging domestic market demand. But the traditional society and the Government hadn't provided enough capital and Yungli often lacked necessary liquidity to complete the manufacture of soda. After the historical success of manufacture of soda, Yungli was still subject to capital constraints.Yungli were still unable to face the challenges of ICI, it's market experience and advanced technology were the best learning object for Yungli. The cooperation could remove the tremendous threat from ICI and reduce the risk of fierce market competition. Fan Xudong's attention shifted from the public stock to using foreign capital. But the use of foreign capital did not succeed, Fan Xudong must find new sources of funding.The conduct of the government almost became the largest background to the development of new industries. China's commercial enterprises had to consider factors other than market competition. The public shares greatly enhanced the legitimacy of the public policies which were essential to commercial enterprises. During the construction of acid factory, the Government provided all the necessary resources which offered massive covinience to Yungli. The joint of government and the financial sector made the sector innovation system integrity.When Yungli obtained a lot of resources which were provided by government, Fan Xudong must take all kinds of duties. Fan Xudong Conglomerate spreaded it's technolgy pridominents to the domestic chemical industry, and a large number of small and medium-size enterprises benefited from the innovation system.The basic and core industry is the key to the development of new industries, all of the efforts of Fan Xudong were based on the unique logic. However, due to the outbreak of Chinese-Japanese War, all of the plans were forced to terminate. In 1943, Fan Xudong formed a more radical plan which was to complete the unfinished path of Alkali and Acid Industry Independence. In view of the industry security, the significance of the Alkali and Acid Industry Independence to the development of Chemical Industry in moder times is obvious. During the Chinese-Japanese War, Yungli faced a unique situation, the Government decided to provided more resources to a commercial enterprise. The support had become more sophisticated, Yungli showed the influence of their increasing prevalence and it's power to change the velocity of development of modern China's new industries.Unfortunately, Fan Xudong died at the end of the war. His death suggested the end of Yungli's development strategy. During the post-war periods, Yungli recuited a large number of redundant personnels and staffs, the diverge between technology group and management group was obvious. The problem of management made the sustainability of the development of Fan Xudong Conglomerate under serious challenge.In the new period, the government sought to establish a more stringent regulatory system. The poor market conditions and internal management problems forced Yungli rushly seeking for its destination. Public-private partnerships was inevitable. After the large-scale expansion, the new development system entered a long-term stagnation. We often criticize the introduction of technology, but self-innovation actually face the same problem. The sector innovation system which merged the advantage of the introduction of technology and technological innovation represents the hope of industrial progress.