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Handbook of East Asian

Fu-Lai Tony Yu, Ho-Don Yan

Entrepreneurial strategies in Asian latecomer firms

Publication details https://www.routledgehandbooks.com/doi/10.4324/9781315765693.ch2 John A. Mathews, Hao Tan Published online on: 21 Oct 2014

How to cite :- John A. Mathews, Hao Tan. 21 Oct 2014, Entrepreneurial strategies in Asian latecomer firms from: Handbook of East Asian Entrepreneurship Routledge Accessed on: 25 Sep 2021 https://www.routledgehandbooks.com/doi/10.4324/9781315765693.ch2

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The publisher does not give any warranty express or implied or make any representation that the contents will be complete or accurate or up to date. The publisher shall not be liable for an loss, actions, claims, proceedings, demand or costs or damages whatsoever or howsoever caused arising directly or indirectly in connection with or arising out of the use of this material. Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 ( encompassesthesecondlargestadvanced Theregion withintheregion. environments offirms China. There heterogeneity hasalsobeengreat acrossthe multinational from manufacturers in Taiwan, Korean conglomerates ( fromtheregion, businessesial firms fromHongKong, fromfamily ranging hightechfirms intensive research forthepastseveral decades.Previous studieshave focusedonentrepreneur- conventional ofinternationalization. theories business), of international the greening we emphasizeinthischapterthechallengethey posefor are ofinterestated internationalization frommany perspectives to (notleasttheircontribution dominance inlessthanadecade(Mathews andTan, andtheiracceler- 2012).Whilethesefirms (PV) industries, whichhave extremely rapidly, emergedandinternationalized toworld rising Chinese windpower answers.preliminary andsolarphotovoltaic Ourexamplescomefromthe account forthosefeatures? Inthischapter, we explore thesetwo questionsandprovide some Andwhattheoretical framework theirgrowth andprosperity? to pursue canbeemployed to Whatare thedistinctivehave thatEastAsianfirms features adopted strategies inentrepreneurial Introduction 30 neurial strategies of EastAsianlatecomerfirms, strategies namelythe linkage,neurial leverage (LLL) andlearning leverage onforeign technologies, aswell asthestrongroleofstateinthosefirms’ success. and acceleratedinternationalization, , reliance andorganizationalnetworks, onpersonal Common features shareditself was byincluderapidgrowth many alatecomer. latecomerfirms Japan China; especially when Japaneseand now firms but they couldalsobeobserved insome fromlatecomereconomiessuchasSouthKorea mostprofoundinfirms are andTaiwan, certainly remarkable features have ofmany .Thosefeatures entrepreneurial emergedinstrategies tems, cultures, structures. andindustrial levelsat various ofeconomicdevelopment, there alsoexistlargedifferences intheirpoliticalsys- Hong Kong,Not onlyare economiesintheregion economy andthelargestemerging (China). The emergence and growth of entrepreneurial firms fromEastAsiahasbeenthesubjectof Theemergenceandgrowth firms ofentrepreneurial We applyatheoretical framework that oneofushasdeveloped toaccount fortheentrepre- andtheirenvironments differences intheregion, amongfirms Despitewide-ranging some

Japan), (NIEs), newly industrialized includingTaiwan, SouthKorea and Entrepreneurial strategiesin Linkage, leverageandlearning Asian latecomerfi chaebols John A.Mathews andHaoTan ),Japanese business networks, toemerging rms 2 Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 tional companiesenjoy certain investments by multinationals (Dunning, 2000).TheOLIframework suggeststhatthemultina- to thedominantOLI(ownership, locational, Business. accountinInternational internalization) Multinationals’ fromtheAsiaPacific region, framework asanalternative andcomplementary successofwhatwere andinternational dubbed strategies explain theinternationalization ‘Dragon framework (Mathews, 2002, 2006a, 2006b).TheLLLframework introducedto was originally Source: AdaptedfromMathews(2006a,p.21). Time frame : transactioncost Not partofOLIframework;organization Driving paradigm Organization internationalization Process of Biastowardsoperationsinternalized Learning Make orbuy? Locationsestablishedaspartofvertically scope Geographic resources Proprietary Resources utilized Criterion Table 2.1 economy itselfhasundergonephenomenaleconomicandinstitutionaltransitions. andtheregion were foundedrelatively recentlyintotheglobal hasbeenincreasingly whentheregion integrated Second, offirms. tic growth strategies we firms, focusonentrepreneurial especiallythosethat domains. We applytheLLLframework expansionaswell tocapture bothinternational asdomes- fromEastAsia,ine thegrowth andsuccessoffirms whetherintheirdomesticorinternational reproduced in LLL andtheOLIframeworks inaccounting foradvantages ofmultinationals over is localfirms of , andcontrastbetween andmarket the dynamics.Acomparison disequilibrium framework ofLLLisbasedonstrategizing, are heldtotake where firms decisionsinconditions microeconomics (withitsunrealistic assumptionsbasedonequilibrium), whereas thealternative from Note thattheseare allconcepts deriving than throughtradeintheopenmarket (ibid.). ization advantages (I)thatthecompany canenjoy inproducingabroadrather by engaging ofproduction; suchascheaperfactors the hostcountries and(3)they benefitfrominternal- as brand, toscale; orreturns technologies superior (2)they enjoy locationalattractions(L)of liabilities offoreignness thatlieintheirownership-specific advantages (O)over such localfirms rivals. Theseare: (1)they caninvest overseas andcompetewithlocalcompaniesdespitethe TheOLIframework outlinesthree typesofadvantages forces offoreign asthedriving direct Inthischapter, we extendtheLLLframework alongthreefronts.First, interrelated we exam- OLI andLLLframeworkscompared Table 2.1 comparing onepointintimewithanother Comparative staticobservations, could bemultinationalortransnational international reachassumed Not partoftheOLIframework:MNEs’ Not partoftheOLIframework across nationalborders integrated whole OLI . a priori microeconomicadvantages inhostmarkets over domestic Entrepreneurial strategiesinlatecomerfirms Resources accessedthroughlinkage Cumulative developmentprocess advantages viaresource leverage Strategy: captureoflatecomer latecomer advantage Global integrationsoughtas linkage Proceeds incrementallythrough repetition oflinkageandleverage Learning achievedthrough through externallinkage towardsoperationscreated international network Locations tappedaspartof with externalfi LLL rms 31 Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 opportunities Promoting broadsearch for accepted toachievegrowth Rapid growthistoppriority; Based onvaluecreation networks Flat, withmultipleinformal resources Episodic useorrentofrequired exposure ateachstage Many stageswithminimal Source: AdaptedfromBrown etal.(2001,p.955). duration withshort Revolutionary Entrepreneurial focus Table 2.2 John A.MathewsandHaoTan 32 those points. Chinese renewable sectortoillustrateandtest energies recent evidence inthe regarding firms Weinteracting processesthatdrive growth andsuccessofthefirms. willthenprovide some ofEastAsianlatecomerfirms, outlinethedynamic, strategies entrepreneurial andbriefly investment. creating opportunities, andthentakingadvantage of ofthemthroughsustainedprogrammes costs’ asneoclassicaleconomistswould argue, ofdiscovering but and ratherforthepurpose notsomuch toreduce usetheLLLstrategies firms that EastAsianentrepreneurial ‘transaction Jarillo,(Stevenson perspective, entrepreneurial and 1990).FromaSchumpeterian we argue (SMEs)but isalsoapplicabletolargefirms exclusive tosmallandmedium-sized enterprises sions, by Brown assummarized approach andtheadministrative approachinmanagementbehaviour alongeightdimen- rently control’.Stevenson contrastandcompare theentrepreneurial andcolleaguesfurther withoutregardown opportunities totheresources orinsideorganizations—pursue they cur- (1990:Jarillo 23)defineentrepreneurship as ‘a processby whichindividuals—either ontheir wind power andsolarphotovoltaic (PV)sectors. Chinese renewable firms, energy work recent inthe caseofglobalexpansion totheimportant build setting.We advantages throughtheLLLprocessesinadisequilibrium thenapplytheframe- linkage, leverage processes, andlearning withoutsubstantial initialresources andhow can firms thedynamicnature oftheframework,articulate highlightingthemutual reinforcements among We forwhich theLLLframework offirms isbestsuited.Third, arguethatthisisthegroup we opportunity Driven byperception of Inthefollowing sectionswe examinelinkage, willfirst leverage asthree andlearning Inparticular, we take theperspective of Entrepreneurial vs.administrativefocusinmanagement         et al. Entrepreneurial culture Growth orientation Reward philosophy structure Control ofresources Commitment ofresources Commitment toopportunity Strategic orientation Conceptual dimension (2001)( entrepreneurship Table 2.2 ). An entrepreneurial approachisnot ).Anentrepreneurial inouranalysis.Stevenson and         failure punished by resources controlled; Opportunity search restricted Safe, slow, steady seniority Based onresponsibilityand Hierarchy required resources Ownership oremploymentof commitment outofdecision A singlestagewithcomplete duration withlong Evolutionary Driven bycontrolledresources Administrative focus Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 as OEM carriers. Ontheotherhand, Taiwaneseas OEMcarriers. alsobenefitedfromthelinkages among firms inthe1980s, oftheglobalPCindustry vertical disintegration andtheposition ofTaiwanese firms was created byese electronicsindustry made possiblelargelybecauseoftheopportunities the Asian countries suchasTaiwanAsian countries (Lin but withgovernment sometimes more importantly firms officials(Peng andLuo, 2000). entrepreneurs inother notonlyneedto develop tieswithmanagers andmaintaininterpersonal national expansions(Zhou (Tang,and exploitopportunities 2010); benefitsfrom growth andinter- andtogainperformance Chinese entrepreneursnetwork todiscover, tiesare regarded asakey for determinant evaluate resource leverage (RL)proceedsthroughthree stages—linkage, leverage andlearning. of resource leverage Fromtheperspective strategies. strategies, ofentrepreneurial theprocessof withlittlebut are thatstart abletocatchupquicklyincumbentsthroughjudicioususe firms leading economies,Japan theconceptalsofitsneedsoflatecomer andtheUSA—but mainly of strategy. Theseconceptswere appliedby HamelandPrahaladtocasesofbusiness successin creation ofjointventures, are makingacquisitionsorlicensingtechnologies centraltosuch aview leverage ofresources (suchastechnologies, , knowhow) actionsas through suchstrategic they take actionsisbasednotonwhatthey already have but onwhatthey aimtoachieve. The actions thatchangetheenvironment, initiatestrategic emphasized thatsuccessfulfirms and where as on strategy ‘fit’ between afirm’s activities andthebusiness environment, HamelandPrahalad to themanagementliterature by HamelandPrahalad(1993).Inplaceofthetraditionalemphasis firms,neurial andinsodoingutilizethefundamentalconceptof ‘resource leverage’ introduced We approachtobirth, adoptastrategic ofEastAsianentrepre- growth andinternationalization of EastAsianlatecomerfi Linkage, leverageandlearningasentrepreneurialstrategies relationships boundedingeographical, socialorinstitutionalspace’ (Zhou entrepreneurs, socialnetworks, thefocushasbeenoninformal or mechanismsand showvarious (Hitt different characteristics (Hamilton, through inEastAsiaare formed fromdifferent 1996:Networks countries offirms 2). organizationalfeature’important ofAsianbusinesses, andtosomeextent, Asiancapitalistsystems haslongbeen regarded as Inter-linkageoffirms text ofEastAsianlatecomerfirms. ‘the most strong tieswithstakeholders; andtohave performance. alargerimpactonfirm more intensive asentrepreneurs tendtomake toestablish, more efforts develop andmaintain networkingentrepreneurial isconsidered tobemore urgentforthesurvival ofstart-ups; tobe (Peng,MNEs inparticular Compared withthenetworking ofmore establishedfirms, 2012). literatureognized ingeneral(Gulati inthestrategy and organizationalnetworks (HoangandAntoncic, 2003). as that take suchforms alliances,through strategic partnerships, andjointventures; connections andthroughinformal Resource leverage always oflinkage. Linkagecanbeeffected withsomeform hastobegin resources. inorder connectionswithothers toaccessexternal andinformal to establishformal involves strategy Linkageasanentrepreneurial andlatecomerfirms ofentrepreneurial theefforts Linkage Linkageplays avitalroleintheemergenceand growth ofnew high-techventures inEast The entrepreneurial strategy of linkage seems particularly relevant oflinkageseemsparticularly strategy Theentrepreneurial andsignificantinthecon- hasbeenwidelyrec- performance networks oflinkageviastrategic tofirm Theimportance guanxi. et al. Linkagecanalsobereflected atdifferent levels, includingpersonal , 2007).Given thestrongrolethatstateplays intheeconomy, rms et al. , inMathews (2006c), 2006). Asdescribed theTaiwan- et al. Entrepreneurial strategiesinlatecomerfirms , 2000) and for Chinese entrepreneurial Chinese entrepreneurial , 2000)andfor et al. guanxi, , 2001,Chinese 2011). For derived from ‘personal et al. , 2007: 674). Social 33 Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 John A.MathewsandHaoTan 34 2009; Luo alization andinnovative whencompared withearlierincumbents(Bonaglia strategies from TurkeyChina, where andHaierfrom eachcompany demonstratesacceleratedinternation- marketprocess hasbeenanalysedforcasesofemerging MNEssuchasMabefromMexico, Arcelik involvedto take therisks Jarillo, (Stevenson and 1990).Inthecaseofwhite goodsindustries, this values, but ratherontheleverage thathave ofopportunities andtheentrepreneur’s arisen willingness basedonexchangeofresourcesof entrepreneurship withequivalent isnotnecessarily economic and totheleverage deployed strategy inparticular. Theprocess by firms latecomerentrepreneurial We pointinrelation toentrepreneurship arguethatthestatementmissesanimportant ingeneral (Mathews, 2002, (2006)states: 2006a),Narula others, atleastinitially, oftheresources. interms fromtheregion, firms successful entrepreneurial they may notappeartobedistinguishedfrom valuable, rare, costlytoimitate and well organized(Barney, 2002).Ashasbeenobserved inmany tages, andwhichevaluates effectiveness strategic oftheresources basedonwhetherthey are ‘existing’ asthesource resources ofitssustainedcompetitive andcapabilitiesofthefirm advan- fromthetraditionalresource-basedThis notiondeparts view ofthefirm, whichemphasizes ‘possess’, they but can whatopportunities ‘discover’ andhow they may take advantage ofthem. In view ofthis, isnotwhat they toentrepreneurs firms andentrepreneurial whatisimportant Entrepreneurship is ‘the processofdiscovering new ways ofcombiningresources’ (Sobel, 2007). Leverage diffusion(Wutechnology andMathews, 2012). on patentcitationdatareveal thatTaiwanese have firms largelybenefited frominternational effects. Further, inTaiwan analysesofmore industries recently emerging suchassolarPVsbased themselves thatwere strengthened byofhigh-techparks andtheresulting cluster thebirth Many Asian firms have toinnovators Many fromemulators Asianfirms undergone atransformation (Chittoor Learning networks above.initiated inthelearning oflatecomerfirm, aslinkagestrategies whichistermed latecomer firm, orthereceiver transfer. inatechnology Finally, transferislikely technology tobe (see e.g. Lundvall, theabsorptive capabilityofthe anessentialconditionindetermining 1992)forms ofskilledemployees.recruitment Second, thenationalinnovation systemofthereceiving country channels, includinglicensing, R&Dcollaboration, FDI, jointventures, tradeofcapitalgoods, and from advanced to developing economies.Technology transfercantake placethrougharangeof networks.or learning First, islikely theleapfrogging tobeenabledby transfer, technology especially found inseveral streams ofresearch, transfer, includingtechnology nationalinnovation systemsand/ strategies,Discussions ofsuchleapfrogging and accessthemarket. asoutlinedinLewis (2007), are cess of many East Asian latecomer firms hasseveralcess ofmany East Asianlatecomerfirms features. First, theStatehasbeenakey force fromWesterncompared withthatofestablishedfirms advanced economies, pro- thelearning In his commentary on the original paperby oneofuswhere theLLLframework ontheoriginal Inhiscommentary appeared Latecomer firms may leverage Latecomerfirms they have opportunities discovered to ‘leapfrog’ intechnology ‘incumbents’ resources toacquire complementary if they hadnothingtoofferinreturn! ceivable thatthey would beabletoleverage with networkspartnerships andinternational [i]fthedragonMNEsdidnothave ownership advantage, somekindofsuperior itisincon- et al. , seemstobethekey strategy driver inthisprocess.However, 2011). Alearning et al. , 2007). et al. , Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 self-organization phy whichemphasizesthat ‘individuals are ofalargersystem notisolatedentitiesbut apart Confucian philoso- First,roots ofthosestrategies. hasbeendeeplyinfluenced by theregion the is notourintentionhere toprovide athoroughdiscussion, we would like toexplore two possible routines’ (Luo andalso inchoosingwhattolearn ‘because they possessfewer deeplyembedded haveregion advantages of thelearning ‘newness’ andmarket lesstechnological becausethey face market. Ontheotherhand,or theinternational aslatecomers, fromthe firms entrepreneurial Western inthesamemarket, counterparts whetheritisthedomesticmarket inthehomecountry isthestrongmarket pressure firms entrepreneurial tocatchupandcompetewiththeir they face followers’), (‘fast ofthose of themare pattern quicklearners thelearning andunderpinning inEastAsiaisshownprocesses oflearning in Figure 2.1 . Microelectronics (IME)inSingapore. andguidingthe Theroleof suchinstitutionsinfostering the ElectronicsandTelecommunications Research Institute(ETRI)inKorea, andtheInstituteof Institute (ITRI)inTaiwan, theKorea Economics andTrade InstituteforIndustrial (KIET)and ment agenciesare publicresearch various institutions, Technology suchastheIndustrial Research amongthegovern- development Especiallyimportant toindustrial ofthecountries. be critical have breakthroughs playedtechnology inkey roleinfostering areas animportant asidentifiedto (2006c), government agenciesinEastAsiancountries, andtheirinteractionmutual support, AsdiscussedinMathews processofmany EastAsianlatecomerfirms. thelearning in driving Source: AdaptedfromMathews (2002). Figure 2.1 e.g. KSIA,TSIA e.g. III,NCB(domestic) shaping andcreation, Why are the LLL strategies so pronounced among East Asian entrepreneurial firms? Whileit Why firms? sopronouncedamongEastAsianentrepreneurial are theLLLstrategies behaviour ofmanyhasdistinctive Thelearning Many EastAsianlatecomers characteristics. Agencies formarket Industry bodies KOTRA (exports) nurturing knowledge e.g. ITRIincubator intensive firms, Agencies for National systemofeconomiclearninginEast Asian countries et al. , 2011: 39). promotion anddiscipline Agencies forindustrial e.g. CDC,SDB,BIM financial leverage Vehicles for e.g. IDB Entrepreneurial strategiesinlatecomerfirms e.g. PenangSkillsCentre and technicaltraining e.g. ITRI,KIET,IME technology leverage industrial upgrading Agencies for Vehicles for attracting vehicles e.g. EDB,PDC Investment- 35 Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 to work for those firms. The latecomer firms have Thelatecomerfirms to work noalternatives forthosefirms. but toengageinLLL. changes;rapid industrial andthusconventional basedonlinearanalysisseemlesslikely strategies competitive greater face pressure, Thosefirms countries. andmore more uncertainties regulatory ismore intheregion volatile face environment thanthatinWestern firms thatentrepreneurial Second,more intheirbusiness dealingsbasedontrust. skilfulandwillingtolinkwithothers the Figure 2.2 John A.MathewsandHaoTan 36 alization inaglobalera. the globaleconomy, whichisthemostusefulway ofthinkingabouttheprocessinternation- process oflearning, orwhatmightbecalledcollective entrepreneurship (Mathews, 2009). resources efficiencyandeffectiveness andtheL&Lstepsbeingaccomplishedwithgreater ina in anever-ending sequence, forleverage withfresh opportunities linkagescreating further of needed resources andaccessknowledge(Hitt (learning) Socialcapitalbuilt throughlinkagecanhelpthecompanygrowth bothleverage ofthefirm. its are built up throughthemutualfirm reinforcement whichdrive processofthethree the strategies those renewable energy industries in China have been phenomenal. in those renewable industries energy LLL framework Thecreation, strategies. toentrepreneurial of expansion andinternationalization tor, namely thewindandsolarPVindustries, which provide evidence fortheapplicability ofthe above. We initiatives specificallyfocusonentrepreneurial segmentsofthesec- intwo industrial Inthischapter,Chinese renewable wesectorasatest caseforthediscussion energy take the Applying theLLLframeworktoChineserenewableenergysector reinforce eachother. ThedynamicLLLframework ( Thelinkage, are leverage notindependent, strategies andlearning ratherthey interactandmutually The dynamicnatureoftheLLLframework interdependent relationships’ (Hitt LLL is a process that brings latecomer firms into greater and greater levels andgreater intogreater into ofintegration latecomerfirms LLLisaprocessthatbrings capabilities Firm size/Firm The dynamicprocessofLLL Leverage et al. , 2001: 358).Embodiedinthisculture, seem Asianfirms Linkage Linkage Figure 2.2 et al. Learning , 2001).Theprocesscanberepeated )suggeststhatthecapabilitiesof Learning 1

Leverage Time Linkage Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 if Canadian Solar is counted as a Chinese ,Canadian Solariscountedasa if whichitisinallbut name)( China (and10outof15 intheworldthe top15solarPVmodulemanufacturers arefrom currently Similarly, supplyabouthalfoftheworldChinese PVmanufacturers solarPVmodules; andnineof wind turbineshave increased fromamere 2.3MWin2007to4302012(GWEC, 2012). ( tookfourplacesinthelistofTopmanufacturers Ten intheworld windturbinemanufacturers markets hasbeenevident.and international Inthewindpower industry, Chinese windturbine 0Mn agCia2.9 7.3 7.1 7.7 6.3 8.2 7.9 8.8 China 9.4 China 12.9 China Denmark Germany India Spain USA Denmark MingYang China Source: REN21(2012). SiemensWind Power Total Sales>40GW United Power Sinovel 10 Suzlon Group Globalmarketshare(%) 9 Enercon 8 Gamesa 7 GE Wind origin of Country 6 Goldwind 5 Vestas 4 3 Wind turbine manufacturer 2 1 Rank Table 2.3 Source: REN21(2012). Rank Table 2.4 1 2 3 4 5 6 7 8 9 9 9 12 13 14 15 T Table 2.3 otal Sales=>40GW The competitiveness of Chinese indigenous firms from those industries in both the domestic inboththedomestic fromthoseindustries Chinese indigenousfirms Thecompetitiveness of Market sharesoftop10windturbinemanufacturers,2011 Market sharesoftop15solarPVmodulemanufacturers,2011 ). Chinese turbineshave Chinese now ).beensoldinmore than19countries, of andexports Others Firms Suntech Power First Solar Yingli GreenEnergy Trina Solar Canadian Solar SunPower Sharp Tianwei NewEnergy LDK Solar Hanwha-SolarOne Hareon Solar JA Solar Jinko Solar Kyocera REC Other Entrepreneurial strategiesinlatecomerfirms Market share Market 51 5.8 5.7 4.8 4.3 4 2.8 2.8 2.7 2.5 2.5 2.5 2.4 2.3 1.9 1.9 21.5 Table 2.4 Country oforigin Country China USA China China Canada USA Japan China China China China China China Japan Norway ). ). 37

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Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 to beinganindigenousinnovator. Powertech; offoreign andhaseventually technologies itselffrombeinganimporter transformed NOVE Energo,other foreignCKD companiessuchasEnerwind, Eozen, IMPSA, andREGen focusingonR&D.subsidiary Bydoingso, thecompany of hasbeenabletoaccesstechnologies (seebelow).(PMDD) technology Vensys was subsequentlyacquired by Goldwindandbecamea Vensys,firm resulting injointdevelopment oftheinnovativeDrive Direct Permanent Magnet pany was withtheGerman engagedinR&Dcollaborationonthe1.2MWturbinetechnology Jacobs, REPower. firm, firm asmallGerman andthe750kWturbinefromGerman Thecom- company, basedonalicencetothe600kWturbinefrom itswindturbinemanufacturing started networks For ofwindturbinetechnologies. example, Chinese windpower have firms embeddedthemselvesthat someofthe inthegloballearning are dueforrelease in2013, andaneven larger12MWmodel issaidtobeunderdevelopment. (SCD) advanced two-blade turbines, whileithasannouncedthatlarger5and6MW turbines Drive Compact 1.5MWthree-bladeoffers turbines and2.5MWaswell as3.0MWSuper Yang hasleapfrogged totheleadtechnologically, throughits alliancewithAerodyn, andnow teme tojointlydevelop turbineswhichhave Ming technicalqualitycertification. won German wind power AerodynEnergiesys- company todoso. firm Ithascollaboratedwith theGerman Chinese in justtwo years. Since2010,NYStockExchange—thefirst ithasbeenlistedonthe totheUSmarketChinese windturbineexporter equipment, thecompany becamethefirst Delta). Previously arelatively transmissionanddistribution smallmanufacturer ofelectrical relativelytry latein2006, Guangdongprovince basedinZhongshanthesouthern (Pearl River suitwithWindtec.been embroiledinanIPRinfringement Charleston, .However,in in2012, Sinovel andWindtec fellout; Sinovel hassubsequently IntheUSA,Africa. Sinovel won acontracttosupply1.5MWturbineforpumpingstation duction pointsinseveral includingtheUSA, countries Brazil, Sweden, Turkey, IndiaandSouth MW-power machines.Sincethen, Sinovel rapidly, hasinternationalized openingsalesandpro- projectwithitsown Donghai Bridge and by 2010ithadsuppliedall34offshore turbinestothe ofAMSC)todevelopiary leading-edge3MWand5turbines(bypassing thekilowatt stage), LLL framework. markets? Letusexaminetheiremergenceinlightofthe in boththedomesticandinternational develop inthoseindustries theircompetitive firms Chinese entrepreneurial advantages how did soquickly?And China managetobuildThe questionthenarises:thoseindustries How did inventories hadlittletechnological andknowledgeChinese firms specifictothoseindustries. Compared withincumbentsintheUSA,Japan,in theearlyormid-2000s. Europeand many include jointR&D, andacquisitions (M&As)licensing( mergers Netherlands, andtheUSA(Lewis, Germany 2007, linkages 2011).Thechannelsofforming asearlywindturbineinnovatorsDenmark,companies inahandfulofcountries including The transferfrom toenabletechnology linkageswithforeign partners formed turbine manufacturers Chinese indigenousinnovation. Inthewindpowerleading ultimatelyto industry,Chinese wind licensing, jointventures andforeign company acquisition, aswell aspurchase of equipment— andquicklybuild thecapacitytotapintosourceswith others knowledge oftechnological using topartner isreflected intheirefforts inthoseindustries Chinese firms of Thelinkagestrategy Linkage John A.MathewsandHaoTan 38 MingYang Chinese windturbinemanufacturer, Another Most significant players in both the Chinese wind and solar PV industries wereChinese windandsolarPVindustries onlyfounded Mostsignificantplayers inboththe is a private-sector firm that launched into the wind turbine manufacturing indus- thatlaunchedintothewindturbinemanufacturing isaprivate-sector firm 3

Sinovel Goldwind, worked closelywithWindtec (asubsid- the largest Chinese windpower thelargest Figure 2.3 ). Figure 2.3 reveals Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 Zhongshan. Ming Yang base and associatedsupplychainclusterat hasestablishedastrong manufacturing Source: BasedonLewis(2011,p.297). Figure 2.3 labour mobility are identified as two main channels through which Chinese solar PV firms haveChinese solarPVfirms labour mobility are identifiedastwo mainchannels throughwhich utilized licensinginaccessing technology. Instead, equipment and ofmanufacturing imports PV andfoundthat, incontrasttothewindpower industry, rarely Chinese solar PVfirms the De laTour Avantis Similarly, Yinhe Ghodawatt Zhuzhou Inox Wind CSR CKD NOVE Powertech Haizhong Enerwind Energo SEWind REGen IMPSA Eozen Wind powertechnologytransfernetworks CSIC et al. PV manufacturers (2011) studied the international technology transfers to the Chinese solar tothe transfers technology (2011)studiedtheinternational Avantis on eeomn ies M&A License Joint development Dongfang Goldwind Aerodyn Windtec Hewind AMSC- Vensys in China have alsolargely built onforeign initially. technologies in Chinese firms Hyundai REPower Sinovel Jacobs Aerpac Suzlon B.V. XJGroup SBW Foreign firms Donsan Entrepreneurial strategiesinlatecomerfirms Sudwind Hansen Windey Fuhrlander Tecnometal Beizhong Daewoo DeWind Beijing NEPC Micon A-Power Global Wind Power Aeronautica Lagerwey Norwin 39 Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 John A.MathewsandHaoTan 40 utilizing thelargest possiblemarket fortheirproduct, namely, the globalmarket.Chinese Inthis, were abletodevelop advantages basedonstandardization, mass productionandcostreduction, forHanergy),CIGS thin-filmtechnology and silicon forLDKandGigaSolaron crystalline have (inthiscase, tofocusonadominanttechnology allutilizedtypicallatecomerstrategies on national , andmore togain inlicensefees’ (Lewis 2007: 226). nies are more likely toshare because theirtechnologies ‘they have ofinter- lesstoloseinterms withsecond-tierforeignlicensing agreements companies intheindustry. Thosesmallercompa- byChinese companiessuchasGoldwindmanagedtoestablish leadingwindturbinecompanies, opportunities. Chinese windandsolarPVcompaniestoconsolidatetechnological,by financialandinstitutional intothecompanies’opportunities capabilities.Anumber ofleverage have strategies beenadopted intoglobalsupply chains;nities toparticipate but that willnotguaranteetheconversion ofthe oflinkageswithforeign companiesmay Formation withtheopportu- provide latecomerfirms Leverage andskillsattheinitialstageofdevelopment technologies acquired thenecessary ( strategic to complement the manufacturing anddesign, assetstocomplementthemanufacturing in strategic assummarized 2012, launchedanumber ofdownstream andupstream acquisitions, inorder toacquire foreign example, Suntech, thelargestsolarPVmanufacturer intheworld implosionin untilitspartial from overseasnologies by actively typeofFDIactivities. intotechnology-seeking For engaging Chinese PVcompanies. and managementofmostlarge the latter, forexample,Chinese diasporaandforeignersmake upalargenumber oftheboards leverage knowhow, andmarket technologies access. wereChinese PVfirms able to Canadian Solarandother through suchlinkagesthatSuntech, AcquisitionofamajorityinterestinCSGSolarAG,orSolar, aGermancompanyengaged • AcquisitionofKSL-KuttlerAutomationSystemsGmbH,orKSL-Kuttler, aleadingGermany-based • AcquisitionofEISolutions,Inc.,acommercial PVsystemsintegrationcompanybasedintheUnited • InvestedinGlobalSolarFund,S.C.A,Sicar, orGSF, aninvestmentfundcreatedtomakeinvestments • AcquisitionofSuntechJapan(formerlyMSK)whichisaleadingmanufacturerBIPVsystemsbased • InMarch 2008,thecompanyacquiredatotalof14.0%equityinterestinNitolSolarfor • InMarch 2008,thecompanyacquiredan11.7%equityinterestinHokuScientifi• c (aNasdaq-listed Table 2.5 technology silicononglass in developing,producingandmarketingPVcellsonthebasisofcrystalline manufacturer ofautomationsystemsfortheprintedcircuit boardindustry States, nowpartofSuntech in privatecompaniesthatownordevelopprojectsthesolarenergysector in Japan Russia the JerseyIslandsandisinprocessofoperatingapolysiliconmanufacturingfacilitynearIrkutsk, consideration ofapproximately$100million.NitolSolarisaprivatelyheldcompanyincorporatedin company basedinIdaho,US)foratotalconsiderationofapproximately$20million In the Chinese PVsolarindustries, companiessuch asLDKSolar, Inthe andGigaSolar Hanergy Inthewindpower industry, Lewis (2007)observes that, barriers technological great facing Chinese solar PV firms seemtohave ChinesesolarPVfirms taken amore aggressive approachtoacquire tech- FDI activitiesofSuntechupto2012 Table 2.5 ibid.). .Itis For Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 mounted—but afterithadachieved itsintendedoutcome. was Thestrategy discontinuedand localizethetechnologies. aftervigorousforeign protestwas thisprocess,During were diffusiontookplaceandlocalcompetitors technology abletoabsorb products. China ratherthanexport in subsidiaries market hadtochoosesetupmanufacturing locally (Lewis, 2007).Inorder tomeetthisrequirement, foreign companieswishingtoaccessthe required 70percentoftheturbinecontentinconcessionwind power projectstobemade China and requirement withthesupport ofthegovernmentis concerned forlocalcontent. Chinese windcompanieshave benefitedfrom particularly Onepolicythatthe two industries. overcerns played globalwarming thisprocess. aroleinfacilitating China (Greenpeace,14 companieswere listedonstockexchangesin 2012)—nodoubtthecon- the stockexchangesinUSA, 8companieswere listedonHongKong stockexchanges and Bytheendof2011,industries. Chinese PVcompanieshadbeenlistedon nofewer than11 were foundedtoraiseexpansioncapital; thisisaphenomenonnotcommonlyseenintraditional havetwo onstockmarkets industries soonafterthey launchedIPOs(initialpublicofferings) cially, forthem. amajorsource whichiscurrently ofconcern like SuntechandLDKSolarhavesolar PVfirms beenvery successful—ifover-stretched finan- case of the international expansion of Chinese wind power isthatita andsolarPVfirms) expansionof case oftheinternational Thefundamentalreason (asillustratedhere whyoflatecomers inthe LLLmatchesthestrategies Conclusion intoworld-cutting edgeinaprocessoflearning. istransformed and finallythetechnology ment; knowhow are andtechnology leveraged fromthelink, andassimilatedwithinGoldwind; link ismadeby GoldwindwithVensys, arrange- whichisthenconsolidated intoapermanent andeventuallyas apartner ofGoldwind.SothisisaclearcaseLLL—a becameasubsidiary 2.5 MW. Theinnovative was technology developed Vensys, jointlywiththefirm whichstarted and Yang, 2013). Goldwindturbinesare now exclusively PMDDmachines, both1.5MWand with gearing, andthereby provides more areliable operationaswell efficiency(Sun asgreater on itsjointventure withVensys. ofturbinetractionthatdispenses PMDDisanadvanced form Drive) technology,Direct of PMDD(Permanent Magnet asintroducedby Goldwind, based orably by Kim(1997)asmoving ‘from imitationtoinnovation’. Thisisclearlyseeninthecase ties withinfirms, sothatthey frontier, approachthetechnological mem- inaprocessdescribed the USA, demonstratingitscapacitytoleverage knowledge resources fromthedeveloped world. ‘emerging’ markets. MNEsfromemerging Ming Yang nowDenmark and hasR&Dcentres inboth ofjointdevelopment ofthe SE Asia.ThisSouth-Southpattern issurely oneofthecharacteristics ship withIndia’s todevelop Reliancegroup windturbines fortheIndianmarket andbeyond into Denmark (nearVestas)both andintheUSA.In2012Ming Yang partner- announcedastrategic The company begantotapintoglobalknowledge networks throughestablishingR&Dcentres in markets,into international thecompany was confidentenoughtoinvest inknowledge acquisitions. Chinese windpower Ming firm in thecaseof Yang, afteritsinitialresource leveraging forays For example,ciency andeffectiveness asaprocessoflearning. witheach iteration—bestdescribed TheseprocessesofL&Lhave beenrepeated over andover again, withthecompaniesgainingeffi- Learning The Chinese government development hasprovided intheindustrial ofthe strongsupport The Inorder toleverage financialresources,Chinese companiesinthose of alargeproportion The aim of the repeated application of L&L strategies is to raise the technological capabili- istoraisethetechnological Theaimoftherepeated application ofL&Lstrategies Entrepreneurial strategiesinlatecomerfirms 41 Downloaded By: 10.3.98.104 At: 21:23 25 Sep 2021; For: 9781315765693, chapter2, 10.4324/9781315765693.ch2 Dunning,J.H. (2006) ‘Comment ondragonmultinationals: new players globalisation’, in21stcentury Dunning,J. H.(2000) ‘The eclecticparadigmasanenvelope ofMNE foreconomicandbusiness theories delaTour, A., Glachant, M.andMénière, Y. (2011) ‘Innovation transfer: technology andinternational the CWEA (2012) Chittoor, R., Sarkar, M., Ray, S. andAulakh, P. S. (2009) ‘Third-world copycatsmultinationals: toemerging Gulati,N. andZaheer, R.,Nohria, A.(2000) ‘Guest editors’ introduction tothespecialissue: net- strategic Greenpeace (2012) Brown, T.E.,Davidsson, P. andWiklund,J. (2001) ‘An operationalization ofStevenson’s conceptualization Barney,J. (2002) Bibliography Arecent casefromtheHarvard BusinessSchool(Vietor,China’s successesinwindpower, 2012)examines 1 Notes reasoning. are Obviously important, micro-economicprinciples but they are notthewholestory. shouldbebasedonstrategic strategy because inourview anapproachtointernationalization (if ever) foundinreal-world business. We circumstances ininternational stress thesedifferences, sal, free accesstotechnology. 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