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Technological Innovation:Experience and Inspiration from Sample Enterprises

Jul 18,2007

Zhang Zhengjun & Chen Xiaohong

In this article, we select 11 sample enterprises to analyze their innovation effort and experience and put forward some suggestions.

I. Basic Information about Sample Enterprises

The 11 enterprises are distributed in the sectors of power generating equipment, pharmacy, electronics, information technology and iron and steel. Most of them are large enterprises, with various types of ownership. Specifically, they comprise two private enterprises, four state-owned enterprises and five listed companies (see table 1).

Table 1 Basic Information about Sample Enterprises

Name

Core business

Ownership

Sales revenue (2005)

Sector

Status

Dongfang

Electric

Making equipment for hydro and thermal power generation

Making equipment for nuclear power generation and new energies

Making equipment for automatic power control and undertaking engineering contracting for power stations

State-owned,

having two

listed

subsidiaries

RMB 18.1

billion

 

Power generating

equipment

One of China's three leading power generating equipment makers

Ranking first in terms of power generating equipment production in recent years

Internationally advanced in design and production in several areas

Double- Crane

Making medicines (for major infusion, cardiovascular diseases, endocrine diseases and anti-infectious diseases) and trading in medicines

Stockholding,

listed

RMB 4.7

Billion

 

Chemical

pharmacy

Ranking ninth among China's top 10 drug makers in 2005

Anbote

Making antibody for genetic-engineered guided tumour treatment

Private, formerly genetics laboratory of Chinese Academy of Sciences

Zero,

having

no product sales

Biological

pharmacy

China's leading enterprise in research on genetic-engineered antibodies

Having developed five genetic-engineered antibodies for guided tumor treatment

Being in investing period and working hard to present new drugs as early as possible

Vimicro

Developing, designing and industrializing multimedia chips (digital and multimedia)

Stockholding,

Nasdaq listed

RMB 769

million

 

Integrated

circuit

Possessing world-class core technologies

Its digital multimedia chips account for over 60% of global market of computer image input chips

Hisense

Making TV and other black and white household appliances

Making IT and communications terminals

State-owned,

having one listed subsidiary

RMB 33.4

billion

Electronic

information

Ranking seventh among China's top 100 electronic information enterprises and leader in household appliances and flat-screen television

Haier

Making refrigerators, air-conditioners, washing machines, water heaters and other white household appliances and TV and other black household appliances.

Making computers, cell phones and other ICT products and conducting home integration

State-owned,

having one

listed

subsidiary

RMB104.9

billion

 

Electronic

Information

Ranking second among China's top 100 electronic information enterprises and fourth among world's white appliance makers

Ranking first nationally in nine products and third internationally in three products

TCL

Multimedia electronics (color television), mobile communications (cell phone) and digital electronics (computer)

Air-conditioner and other white household appliances, core components (modules, chips, displays, power sources), and lighting equipment

Stockholding,

Listed

RMB 52.1

billion

,

with over

50% from

overseas operations

Electronic

Information

Ranking fourth among China's top 100 electronic information enterprises and first in terms of global television sales

Having established business framework for global market and internationalized R&D, production and sales

BOE

Liquid crystal displays and color kinescopes

Color displays and fluorescent digital displays

Stockholding,

listed

RMB 54.8

billion

 

Electronic

Information

Ranking third among China's top 100 electronic information enterprises

Ranking first in China and ninth in world in terms of TFT-LCD production

Ranking first in world in terms of display production and fifth in world in terms of mobile display systems

Huawei

Mobile communications (including 3G) and data transmission

Optic-fiber networks, fixed communications, software and terminals

Private

RMB 45.3

billion

 

Information and

Communications

One of China's largest communications equipment makers

Ranking first in China in terms of patent applications

Ranking among world's first camp in 3G sector

Zhongxing

Program-controlled switchboards

Communications systems and equipment

Stockholding,

listed

RMB 21.6

billion

 

Information and

Communications

One of China's largest communications equipment makers

Ranking among world's top 100 IT enterprises

World leader in CDMA2000GoTa and other products

Baosteel

Iron and steel production (predominantly plate products and secondarily rod products)

Trade processing service, iron ore mining, finance and information

State-owned,

having one listed subsidiary

RMB 176.1

billion

 

Iron and steel

Largest and highest in China in terms of scales, product variety, technological contents and added values, with steel production more than doubling that of China's second largest steel producer

II. Five Modes of Corporate Innovation

1. Classification of modes of corporate innovation based on input-output relations

Corporate technological innovation is an activity in which enterprises invest knowledge, capital, human resources and other factors to create new products, new technologies or new customers. Technological knowledge input can come from endogenous and exogenous sources. endogenous source refers to the technological knowledge owned by enterprises through independent research and development, while exogenous source refers to the technological knowledge acquired by enterprises through import, acquisition and other methods. Innovations can be product-oriented, technology-oriented and market-oriented based on the results of innovation and can be revolutionary and reformative based on the degree of innovation. Based on the difference in the input factors and output results of corporate technological innovation, the technological innovations of the 11 sample enterprises can be divided into five modes (see Table 2).

Table 2 Main Modes of Corporate Technological Innovation

The mode of original innovation means the enterprises can independently develop original core technologies. For example, Vimicro has independently developed and possessed several world-class multimedia core technologies and Anbote has possessed world-class R&D capacities and several international patents.

The mode of catching-up and surpassing innovation can ensure the enterprises rapidly enhance their technological capacities though they are not necessarily the creators of core technologies, but the enterprises preliminarily have the development capacities, their overall technological capacities have reached the levels of first-rate enterprises, and they have begun to have major original innovations. Huawei and Zhongxing began their operations in the 1980s by producing small user switchboards. They have realized technological catch-up and surpassing by seizing the opportunities arising from the transition of mobile communications technology from first generation to third generation. For the enterprises employing the modes of original innovation and catching-up and surpassing innovation, an important basis of their core competitiveness is that they have fairly strong technological capacities.

The mode of partial innovation means the enterprises acquire key technologies from external sources. Due to the technology capacity gap with the leading enterprises, they only conduct reformative innovations. Innovations of this nature could be either product-oriented or technology-oriented. Dongfang Electric has for long imported key technologies and conducted partial innovations. By so doing, it has seized the opportunities to participate in major markets and has actively carried out technological assimilation and re-creation. Its proprietary technologies in several areas have reached the world's advanced levels. Hisense, TCL, Baosteel and Double-Crane have all carried out product-oriented or technology-oriented innovations after importing production lines and acquiring assemble technologies and capacities. Their products sell better, their production and technological costs are lower and the quality and standard of their products are higher. After forming certain technological and financial strength, they began to gradually carry out more advanced technological innovations.

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