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Platforms, Network Effects and Small Business Dynamics in China: Case Study of the Shanzhai Cell Phone Industry

Discussion Papers


by Ke DING and Jiutang PAN
July 2011


This paper seeks to argue the significance of platforms on emerging markets through a case study of the Shanzhai cell phone industry in Shenzhen, China. In this industry, value chains are being driven by both the technology platforms and the market platforms. The former include MTK baseband chipset, and so-called Shared PCBA and Shared Mould. The latter include the North Huaqiang Market and the Purchasing and Money Platform. Technology platforms greatly reduced the technological barriers to entry for independent design houses and system integrators, while market platforms markedly improved their poor marketing and purchasing abilities. Due to factors such as social networks, supporting industries, informality and platform governance, strong network effects have been exhibited in the two types of platforms, which have not only fostered numerous start-ups, but have also led to effective exploitation of emerging markets.

Keywords: Platform, Network Effect, Shanzhai Cell Phone, Emerging Markets, China
JEL classification: L63, O14, O17

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