China’s Development Model

The context in which Chinese firms and, as a nation, China is attempting to catch-up is fundamentally different that that facing earlier latercomers such as Japan and Korea. This paper contrasts these contexts and describes an alternative model of catch-up that can be discerned through an examination of the industries in which Chinese firms are competing successfully. The basic elements of their two-stage catch-up strategy is that they first take advantage of the modularization of manufacturing in an industry, source technology externally, and are intensely market-oriented in their product innovation; only later do they pursue internal capabilities in technological development to generate process and product innovations.