The Role of a Technological Platform in Facilitating Innovation in the Global Value Chain: A Case Study of China's Mobile Phone Industry

Discussion Papers

No.692

by Ke Ding, Shiro Hioki

February 2018

ABSTRACT

This study investigates the role of a technological platform in facilitating innovation in the global value chain. The literature argues that a technological platform facilitates innovation through its modular architecture. However, in case of Chinas mobile phone industry, innovation was paradoxically facilitated by the Qualcomm platform with a low degree of modularity. Several reasons are responsible for this phenomenon. First, innovation in the mobile phone industry has altered into a systemic innovation. Second, Qualcomm formulated a strategy that enables deep product differentiation, which precisely satisfied the upgraded domestic demands in China. Third, Chinese firms have accumulated strong capabilities that receive special technical support from Qualcomm. Fourth, stimulated by its unique licensing model, Qualcomm has been strongly motivated to help customers create value. The case of Chinas mobile phone industry indicates that, under some conditions and institutional arrangements, technological platforms can possibly help firms in developing countries to engage in innovation and create value.

Keywords: technological platform, modularity, systemic innovation, revenue-sharing contract
JEL classification: L20, O10, O30

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