Management of technical innovation in Chinese state-owned enterprises. Case studies from a stakeholder perspective

IntroductionThe economic environment of China has been changing from the centrally planned economic system to a Western-like open market system. After two decades of gradual, piecemeal reform and opening-up, in particular with China's entry into the World Trade Organization (WTO), the Chinese state-owned industrial enterprises, which are the main contributors to the government's revenue and which take 66 percent of the total assets of the industrial sector (Liu and Gao, 1999), are now confronted with fierce challenges from the non-state sectors (such as the private economy, the township and village enterprises (TVEs) and the foreign-funded enterprises).For much of the twentieth century there has been a tendency to give efficiency a priority over innovation, but this tendency began to alter in the 1970s in the Western world. Bolwijn and Kumpe (1990) described the evolvement of large-scale firms from the 1960s to the 1990s in terms of market requirements and performance criteria in the manufacturing industry, from "efficient firm" via "quality firm" and "flexible firm" to "innovative firm". Today innovation is surpassing efficiency as the primary principle for deciding the most appropriate form of organization (Clark and Wheelwright, 1993). Technical innovation is embedded in organizations, the effective organizations, in particular. The essence of competition is in fact to win over the rivals by making the products diversified. To realize this, most companies believe that they must be innovative to survive or increase profits, which are obviously the key reasons behind innovation. In order to be efficient and competitive in the marketplace, organizations utilize their advantages in research and development to differentiate their products from the others in variety, functionality and quality, to apply the advanced processes and equipment to lower the cost by mass production, or to provide customers with first class after-sale service, and so on. Any of these diversifications may gain competitive advantage, and at the center of all these is technical innovation.In China, the technology and equipment of state-owned enterprises (SOEs) became upgraded in the 1980s largely by importing from the developed countries. From the mid-1980s to the end 1990s, the Chinese firms focused on the absorption of foreign technologies, accompanied with imitation. Not until the recent past years, the Chinese government called on the SOEs to carry out independent technical innovation, so as to improve their competitiveness in the domestic and global market. The SOEs are learning the good practices from the Western innovative firms as well as the internationally successful multinational corporations (MNCs) in order to improve their effectiveness of innovation management, since there is a lack of such theory and guidance in China.Research problemThe above observations brought us the impetus to investigate the possibilities for the application of (Western) good practice in management of techincal innovation to the Chinese SOEs. The central research problem for this thesis is: As a result of the changing stakeholder situation in China, to what extent are mechanisms for technical innovation in place in Chinese SOEs, and to what extent are the western good practices on management of technical innovation applicable?