Path-following or leapfrogging in catching-up: The case of the Chinese telecommunications equipment industry

By reviewing the development of the telecom equipment industry from fixed telephone switches to the recent Chinese 3G mobile communications technology, we conclude that the lack of matching of existing foreign products with the domestic market needs has been a primary incentive for Chinese companies to catch-up. The accessibility of knowledge through various government support schemes, alliances with foreign companies and/or own R&D efforts have shaped the capability of Chinese companies to catch-up. Government support has been an important but probably not the dominant factor. Leapfrogging strategies will usually meet more tough problems than path-following. Government plays a more important role in the leapfrogging than the path-following catching-up process. Openness to the world and encouragement of the collaboration and alliance activity can give companies in the developing countries more opportunity to access the latest knowledge. In the R&D intensive industries, FDI can be an important factor for technology transfer and catching-up.