Platforms, innovation and capability development in the Chinese domestic market

We compare the evolution of the mobile phone and electric two-wheeler sectors in China. In the first decade of the twenty-first century, Chinese firms have used technologies bundled into platforms to meet the needs of low-income Chinese consumers. The possibilities of downstream innovation opened up by platforms were not pursued. This paper shows how changes in Chinese consumer demand led to pressures for greater product differentiation and innovation, and how businesses responded to this through investing in research and development, developing their value chain linkages and mobilising local and national innovation resources. We highlight sectoral differences, particularly with respect to the speed of technological change in the mobile phone industry and its consequences for value chain linkages and inter-firm learning.