Abstract: Indigenous Innovation and Economic Development: Lessons from "China's Leap into the Information Age"

William Lazonick

Abstract

On August 11, 1999, Qiwen Lu died during an operation for liver cancer at the age of 41. Less than two months earlier, he had submitted the final version of a book manuscript, China's Leap into the Information Age: Innovation and Organization in the Computer Industry, to Oxford University Press. The book contains detailed case histories, based on original field research, of four leading indigenous computer companies in China—Stone, Legend, Founder, and Great Wall—that emerged out of China's science and technology infrastructure inherited from the era of central planning. This paper distills the insights contained in Lu's four business histories to inform the theories of innovative enterprise, indigenous innovation, and economic development. Lu's studies emphasized the importance for the success of these enterprises of 1) knowledge and people drawn from the Chinese S&T infrastructure, 2) strategic control by autonomous enterprise managers with scientific backgrounds over the allocation of resources in the new technology enterprises, 3) financial commitment to the innovation process through managerial control over internal funds and, at critical junctures in the growth of the firms, stock market listings that raised cash without sacrificing managerial control, and 4) organizational integration of R&D, manufacturing, marketing, and services to generate higher quality, lower cost products. The concluding section of the paper considers the roles of indigenous innovation in China's economic transition, with an emphasis on the importance of understanding the role of innovative business enterprises in transforming a centrally planned economy into one that is more oriented toward market competition.