Keywords: innovation, Pearl River Delta, PRD, China, absorptive capacity, small and medium–sized enterprises, private SMEs, resource–based view, RBV, global production networks, GPN, binary logistic regression modelling, success factors, technology upgrading, electronics industry, government contacts, domestic markets, resource constraints, internal capabilities
Success factors for upgrading and innovation in the electronics industry: an analysis of private small and medium–sized enterprises in the Pearl River Delta
China's quest for innovation and upgrading has motivated a growing number of analyses of innovation and upgrading processes, their main drivers and typical outcomes in China. Most of these studies are concerned with large foreign–invested and state–owned firms. They have found integration into global production networks (GPN) as well as strong governmental support to be important success factors. In contrast, little has been published about the innovation and upgrading behaviour of private small and medium–sized enterprises (SMEs). This paper addresses the upgrading of private SMEs based on a sample from the electronics industry of the Pearl River Delta (PRD). We find that a number of success factors usually assumed to stimulate upgrading in China have no influence. These include GPN integration, government contacts and other inter–personal linkages. The upgrading of private SMEs can instead be best explained through a focus on the growing domestic market, overcoming typical resource constraints and a reliance on internal capabilities.