Authors: Loren Brandt, Eric Thun
Addresses: Department of Economics, University of Toronto, 150 St. George Str., 303, Toronto, Ontario M5S 3G7, Canada. ' Said Business School, University of Oxford, Park End Street, Oxford OX1 1HP, UK
Abstract: This paper examines the question of how a shift in the end point of a global value chain alters the prospects for industrial upgrading in a developing economy through an analysis of the mobile telecom sector in China. Over the last decade, China has become the world|s largest market for mobile phones, and domestic Chinese firms have been able to take advantage of both increasing modularity (to outsource components that they lacked the technology to produce) and their superior knowledge of low-end market segments to expand sales vis-a-vis foreign firms. But these advantages are temporary: high levels of modularity lead to intense competition and low-profits among domestic firms and foreign firms rapidly improve their market knowledge. The key to long-term success for domestic firms is investment in design capabilities, and a shift away from purely modular relationships, but the rapid rate of technical change in the industry complicates this process.
Keywords: China; mobile phones; cell phones; modularity; shanzhai; industrialisation; emerging markets; value chains; upgrading; mobile telecoms; investment; design capabilities.
International Journal of Technological Learning, Innovation and Development, 2011 Vol.4 No.1/2/3, pp.148 - 180
Published online: 15 Aug 2011 *Full-text access for editors Access for subscribers Purchase this article Comment on this article