The Birth of Innovative Enterprises in China

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The Birth of Innovative Enterprises in China, by Feng Kaidong, a research fellow from the School of Government at Peking University, is grounded in a wealth of data gathered from more than 500 in-depth interviews spanning 20 years. The author contends that in the rise of Huawei, ZTE, BYD, Chery, Geely, and other independent innovative enterprises, neither ownership, enterprise scale, nor market destination are the key factors that facilitate or restrict the independent innovativeness of enterprises. The fundamental factor that determines whether companies are willing to invest in highly uncertain new products is the strategic will of the enterprise. 

When the strategic will for independent innovation determines the direction of key resource allocation within the enterprise, static efficiency of resource allocation becomes a secondary concern. An enterprise tends to dynamically improve the efficiency of innovation in the long run by enhancing integration and organizational abilities and providing institutional guarantees for technical studies. 

Since the 1980s, certain Sino-foreign joint ventures have chosen to rely on multinational companies regarding their technology strategy, abandoning original product development platforms. While this approach has led to high operational and production efficiency, it has come at the expense of real independent innovation capabilities. By contrast, independent innovative enterprises may not have initial advantages in terms of capital, branding, and other aspects, but they can rely on active technical learning strategies to occupy certain niches in international markets.

The rise of China’s independent innovative enterprises can be attributed to the emergence of an organization model led by engineers and technicians in manufacturing enterprises. In this model, the enterprise mobilizes the organization by making a clear long-term commitment to new product development, while delegating some decision-making authority to the team of engineers responsible for addressing the development task. 

Independent innovative enterprises utilize the product development platform as a carrier to achieve continuous growth of their technical capabilities. This platform refers to a series of products that are technically logically inherited, along with the associated development processes and institutions. Only with such a carrier, can experiences gained by corporate engineers in product development be accumulated and integrated, which represents the essential difference between independent innovative enterprises and “market trading for technology” enterprises. The latter cannot realize systematic knowledge accumulation in the process of localizing production for multinational companies. After building a product development platform, emerging independent innovative enterprises usually adopt the strategy of rapid product iteration. By interacting with consumers and industry partners through continuous technological upgrading, and constantly overcoming the shortcomings and limitations of their own products, they can ultimately distinguish themselves amidst fierce market competition.

Li Yin is an associate research fellow from the School of International Relations and Public Affairs at Fudan University.

Edited by YANG LANLAN