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Learning, combinative capabilities and innovation in developing countries: the case of video compact disc (VCD) and agricultural vehicles in China

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The rate and trajectory of technological progress in China is confined by two important factors, i.e., being a developing country as well as in transition from a command economy to a market economy. Being a developing country means that learning and imitation will be of primary concern in technological progress. Being an economy in transition implies that the national innovation system is also being transformed, i.e., the responsibility of carrying out the technological learning process will be shifted from the central research and design institutes to enterprises, and enterprises will learn from playing the supply-demand market game. As industrial experience and technological capacity are accumulating more and more at the enterprise level, Chinese companies have been learning quickly to turn out innovations that can best serve the domestic market. Adapting a theoretical framework that combines the market-demand induced innovation hypothesis, the learning and imitation paradigm and the combinative capacity argument, this paper will present a picture about technological progress in large developing countries at the macroscopic level. Citing two cases from China's consumer electronics industry and auto industry, it illustrates the possible trajectories of technological progress in large developing countries such as China. The first case concerns the consumer electronics industry. As Chinese consumer electronic companies become more accustomed to the market economy and accumulate enough market experiences, they are learning quickly to turn out improved products or even innovative products to meet market demand. The emergence and widespread use of VCD, a genuine Chinese innovation, is a unique phenomenon that is nowhere observed in the world. This innovative visual-audio product has created a huge market in China and provided excellent opportunity for some new entry companies to build up corporate competence for the next generation of consumer electronics products. At the same time, the appearance of VCD has forever changed the landscape of technological development in China's consumer electronics industry and has some far-reaching impact on the world market as well. The second case detailed in this paper is the invention of agricultural vehicles (AV) whose production has surpassed that of cars and trucks in China in recent years. The phenomenally fast growth of AV will have some long-term impact on shaping the patterns of development for China's auto industry. This paper argues that, due to the change of market structure, the recombining of existing knowledge base and the quick accumulation of economic and industrial experiences at the firm level, the trajectory of technology development in China could well be different from those observed in other countries. In the age of integration, as defined by the progress of information and communication technologies as well as the globalisation of the world economy, a new paradigm of technology development may emerge in large developing countries such as China. This is the message intended by this essay.

Keywords: learning, innovation, integration, combination, trajectory, VCD, agricultural vehicle, China, technology development

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