The Disintegration of Production

The Disintegration of Production

Firm Strategy and Industrial Development in China

Edited by Mariko Watanabe

In the past two decades, China has experienced rapid industrial and economic growth. This fascinating book explores the unique Chinese business strategy of vigorous market entry and low prices, which has been the key feature of this accelerated industrial growth.

Chapter 8: Technology: foreign technology introduction and market entry

Koichiro Kimura

Subjects: asian studies, asian development, asian economics, development studies, asian development, development economics, economics and finance, asian economics, development economics, industrial organisation, institutional economics


This chapter reviews the introduction of foreign technology as a trigger for the vigorous entry of indigenous Chinese firms in the high economic growth period during the reform and open-door policy era. Therefore, in this book, introduction of foreign technology constitutes an environmental factor that facilitates market entry. We define technology introduction as imports of hardware (plants, key equipment, etc.) and technology information and service (technology licensing and transfer, etc.). If firms in developing countries can introduce technology from firms in developed countries, then that introduction enables latecomers to start new businesses quickly. This is how firms in developing countries avoid the costs, time and risks of developing the technology required to enter. Although they can avoid costs, etc., by depending on outside firms, nevertheless it is difficult to enter without technology. Indigenous Chinese firms also at least partially have technology to manufacture and develop products. This chapter shows that introduction of foreign technology underlies market entries and production of new product models by indigenous Chinese firms. Since technology introduction has played a significant role in the growth of indigenous Chinese firms, a large number of studies on it have accumulated. Previous studies have focused on the influence of foreign technology introduction on industrialization in China (Maruyama 1988; Hao 1999), policies and institutions related to technology introduction (Marukawa 1990; Feinstein and Howe 1997; China Research Center, Japan Science and Technology Agency 2010), and actual situations of technology introduction and the resultant changes (Ando et al. 2005).

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