CONCLUDING REMARKS

This empirical result first supports that China’s government encouraged domestic companies to grab market share from brand names, but domestic companies usually selected and adopted outsourcing strategies to entrust foreign companies to design and manufacture their products. China’s communications industrial policy has significantly helped to capture market share, but has not significantly promoted domestic vendors’ R&D ability.

Because of the industrial policy protection, gaining market share was a top priority for China’s cellular phone manufacturers. China’s cellular phone industrial policy made domestic vendors to ignore enhancing their innovative capacities. We can find most China’s cellular phone manufacturers using an outsourcing strategy instead of R&D in house. We also find that China’s domestic vendors’ total shipments and the proportion of SMT and technology are still low. Since local vendors depend on outsourcing or post the brand strategy, the ratio of local makers’ SMT-Line self-assemble shipments to total local makers’

shipments significantly declines. Similarly, because local vendors heavily depend on strategies of outsourcing or posting the brand, the ratio of local makers’ own technology shipments to total local makers’ shipments not significantly decreases.

According to China’s experience and compared with South Korea’s communications industry experience, China’s government should pay more attention to encouraging domestic vendors to make efforts in R&D and manufacturing ability. For example, South Korea’s government combined Qualcomm’s technology and policy to successfully support developing/extending its cellular phone manufacturers, including Samsung, LG, and Pantech, etc. By acquiring IP licenses from Qualcomm, Samsung and LG are now major CDMA2000 handset vendors worldwide and have enough ability to compete with Nokia and Motorola.

The positions of Samsung’s handsets are at the high-end market and LG is also a leader in 3G gaming due to its hold on high R&D ability.

Taiwan is another story: Taiwan’s government has a reserve fund for domestic vendors.

If a native company engages in R&D activities, it will receive expenses and tax deductions.

China’s government can also adjust its cellular phone policy to emphasize R&D and manufacturing ability, such as homemade rate. On the other hand, upstream component supplies are a key indicator to measure R&D ability. Therefore, China’s government should pay more attention to building up a communications IC industry in China which is an essential element to improve its core competition.

For 3C latecomers in developing economies, due to capital, cost, and risk issues, we

suggest that 3C firms could strengthen their R&D efficiency in place of prematurely increasing their R&D intensity before they are large enough. Latecomers should use external resources more efficiently, including alliances, investments, licenses, and so on.

Strengthening R&D efficiency also means that firms may announce more innovative products and reduce time to market at the same time. Finally, governments of lately developing economies could promote domestic vendors by filling the upstream component supply chain, especially key parts and technology like IC and software.

Generalisation is one of the limitations in this paper. Due to industry ecosystems being very different in lately industrialised economies, we should study more cases, including success and failure samples, to find out how to strengthen innovation. We also should further investigate to judge if South Korea’s vertical integrated model can achieve continual success in the future. Quantification is another limitation in this paper. We may use more quantification methodologies in the future to find evidence of how innovation activities affect latecomers.

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