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Catch-Up by Indigenous Firms in the Software Industry and the Role of the Government in China: A Sectoral System of Innovation (SSI) Perspective

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  • Jun-Youn Kim
  • Tae-Young Park
  • Keun Lee

Abstract

This paper analyzes the market and technological catching-up of latecomer firms in two IT service sectors from a sectoral systems of innovation (SSI) perspective. It finds that indigenous software firms in China have selected different learning and catch-up strategies in the different technological regimes. For the online game sector where imitation is easier and incremental innovation is more important than radical innovation, these Chinese firms started with handling the publishing (or distribution) of games developed by foreign incumbents, and later on secured in-house game development capabilities by imitating the products of global leaders. In the applied software sector where both imitation and creative innovation are difficult, Chinese firms attained third-party technologies through M&As, and then differentiated their products by taking advantage of local specificities. However, such learning and acquisition would not have led to commercial success without government regulation against foreign companies, such as business restrictions in online games and exclusive procurement for indigenous products in applied software. Thus, this study underscores the importance of government and regulations in playing the role of “artificially opening” another window of opportunity for latecomers. Copyright Eurasia Business and Economics Society 2013

Suggested Citation

  • Jun-Youn Kim & Tae-Young Park & Keun Lee, 2013. "Catch-Up by Indigenous Firms in the Software Industry and the Role of the Government in China: A Sectoral System of Innovation (SSI) Perspective," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(1), pages 100-120, June.
    • Handle: RePEc:spr:eurasi:v:3:y:2013:i:1:p:100-120
    DOI: 10.14208/BF03353820
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    2. Francesco Quatraro & Marco Vivarelli, 2015. "Drivers of Entrepreneurship and Post-entry Performance of Newborn Firms in Developing Countries," The World Bank Research Observer, World Bank, vol. 30(2), pages 277-305.
    3. Ching T. Liao, 2022. "Skill improvement by product imitation," Small Business Economics, Springer, vol. 58(3), pages 1563-1577, March.
    4. Vivarelli, Marco, 2018. "Globalisation, structural change and innovation in emerging economies: The impact on employment and skills," MERIT Working Papers 2018-037, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Quatraro, Francesco & Vivarelli, Marco, 2013. "Entrepreneurship In A Developing Country Context," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201314, University of Turin.
    6. Minaee, Mohammadreza & Elahi, Shaban & Majidpour, Mehdi & Manteghi, Manoochehr, 2021. "Lessons learned from an unsuccessful “catching-up” in the automobile industry of Iran," Technology in Society, Elsevier, vol. 66(C).
    7. Xiong, Jie & Zhao, Shuyan & Meng, Yan & Xu, Lu & Kim, Seong-Young, 2022. "How latecomers catch up to build an energy-saving industry: The case of the Chinese electric vehicle industry 1995–2018," Energy Policy, Elsevier, vol. 161(C).
    8. Getinet Haile & Ilina Srour & Marco Vivarelli, 2014. "Globalization and Technology Transfer in Ethiopia: Their Impact on Domestic Employment and Skills," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1498, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    9. Francesco Quatraro & Marco Vivarelli, 2013. "Entry and Post-Entry Dynamics in Developing Countries," GREDEG Working Papers 2013-20, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.

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