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The interaction between regulation and market and technology opportunities: A case study of the Chinese mobile phone industry
Hengyuan Zhu
Assistant Professor, Research Center for Technology Innovation, School of Economics and Management, Tsinghua University, Beijing, China
Yan Yang
PhD candidate, Research Center for Technology Innovation, School of Economics and Management, Tsinghua University, Beijing, China
Marin T Tintchev
PhD candidate, School of Economics and Management, Tsinghua University, Beijing, China
Guisheng Wu
Professor, Research Center for Technology Innovation, School of Economics and Management, Tsinghua University, Beijing, China
Abstract
In this paper, we present the case of Chinese mobile phone manufacturers and their development. The issues related to the entry barriers for these manufacturers, such as technological capabilities and market dominance by MNCs, are discussed, as well as the reasons for overcoming these barriers, including technology and market specifics, as well as policies and regulation dynamics.
We argue that market scale, the diversification of the demand, as well as the modular architecture of the products and global supply of technologies are main reasons for the lowering of entry barriers.
Keywords
market entry, regulation, modularity, Chinese mobile phone industry
Article Text
The nature of globalization has favored well-established players, such as multi-national corporations (MNCs), in the expansion of their activities into emerging markets (Dawar & Frost 1999). In the special case of emerging industries, such as mobile telecommunications, MNCs have had a very dominant position due to technological expertise and ownership over core technologies. Firms originating in developing countries, or even those from developed nations with no history in developing and producing technologies in a particular area, are in a very weak position to build own brands and to enter markets with own brand products. In the past two decades, in the mobile phone industry, companies from only two developing nations, China and South Korea, were able to enter successfully into the field. Korean brands, mostly originating from companies with a telecom or consumer electronics background, established their presence in the latter half of the 1990s, while the Chinese mobile phone manufacturing industry emerged at the very end of the last decade, achieving success on the local market in the early 2000s, with indications for entering international markets.
The purpose of this paper is to answer the following question based on a case study of the Chinese mobile phone industry: How were local enterprises in developing countries, in an industry where core technologies are owned by MNCs, able to manage successful entry into the industry?
The approach to the question required review of factors such as interaction between producers and the market, building of technological capabilities, as well as national industry policies, from a historical perspective, as a supportive factor for the development of local companies. The evolution of a China-specific value chain in this industry is also reviewed. The historical perspective approach is used to avoid limitation of the cross-sectional data when analyzing the dynamics of firms and the industry.
The study is based on a literature review and materials drawn from various media sources, including industry reports by consulting and research organizations. Semi-structured interviews with industry professionals, policymakers and local Chinese company managers were also conducted to gain better understanding of the dynamics.
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