‘Low cost–high tech’ innovations for China: why setting up a separate R&D unit is not always the best approach

Abstract

In this article, we investigate the following question: How can multinational corporations set up their R&D organizations in order to make the best use of their existing technologies and experiences, while at the same time gain a deeper understanding of Asian markets, their requirements, and trends? To answer this question we used a case study approach to examine two distinct organizations which are developing specific innovations for the Chinese market. We refer to these innovations as ‘low cost–high tech’ innovations, which seem specifically appropriate for emerging market contexts like in China. Based on our findings, we refine an existing theoretical framework and propose a set of new organization types for R&D units.

Innovation in IT firms: An investigation of intramural and extramural R&D activities and their impact

“…While the free trade borders and the easy movement of human and goods across borders have helped in the development of European innovation systems over the years, this has been taking place in a limited manner over the last 20 years for China (Lundvall, 2007). China is developing itself as a global destination for low cost and high-tech innovation and China's close international tie-ups with firms in different continents is a major influence in this direction (Schanz et al, 2011). Even in the IT sector, China's reputation has A c c e p t e d M a n u s c r i p t 9 grown manifold as a low cost and high innovation destination with the rise of firms like Lenovo, Huawei etc.…”

Managing dual business models in emerging markets: an ambidexterity perspective

“…However, other studies report that there are approaches, which keep the low-cost business model closer to the firm's established premium business model (Zeschky et al, 2011). For example, based on a study in China, Schanz et al (2011) argue that RCIs can be developed in newly created and separated units but also in existing integrated structures. In line with this, it has been argued that low-cost business models for emerging markets may be low-cost replications of those applied in advanced economies or new business models specifically developed for resourceconstrained environments (Sanchez and Ricart, 2010).…”

Disruptive Innovation … in Reverse: Adding a Geographical Dimension to Disruptive Innovation Theory

“…The argument of scholars applying disruptive innovation to explain the success of new products originating from emerging economies is as follows: foreign MNCs develop products for emerging markets and later use them to penetrate the low‐end segment of developed markets in the US and Europe, and domestic firms leverage on their cost structure and knowledge of the domestic context to serve local, and later developed, markets (Ray & Ray, ; Schanz et al., ; Markides, ).…”