The purpose of this paper is to discuss the development of high‐tech industry and the dynamics of technological learning, innovation, entrepreneurship in China through the telecom‐equipment industry.
The paper derives a number of research propositions from the literature and then uses four case studies to show how domestic firms narrow their technological gap in different stages of catch‐up and how these firms have been influenced by their innovation capabilities to catch up to the multinationals.
The major findings of the paper may be summarized as follows. First, the innovation capability and self‐developed technologies have been the key to leading domestic firms in catching‐up with the MNCs. Second, leading domestic firms mainly depend on in‐house R&D development, supplemented with external alliance to build their innovation capability. Third, there are two different catching‐up patterns in China's telecom‐equipment industry. One is “path‐following” catching‐up in global system for mobile communication driven by using new technology in low‐end market. The other is “leapfrogging” catching‐up in the development of phone digital switches and China's own 3G standard (time division – synchronous code division multiple access). However, it seems that the leapfrogging strategy will meet more challenges and problems than the path‐following strategy.
Based on the previous researches about technological learning, innovation and catch‐up in the newly industrializing economies, the paper provides a comprehensive elaboration in Chinese telecommunication industry by using case study approach in an original way.
