Does Strategic Alliance Matter In Managing Innovation In China?

Abstract

Innovation is the route to competitive advantage for a firm. In this regard, strategic alliances, particularly international joint venture (IJV), is an effective vehicle for creating innovation capabilities. This paper attempts to explore innovation activities in IJVs between Chinese and Western companies. China is currently largely an OEM country that supplies the whole world with a wide variety of products. However it still lacks a higher level of innovation. The paper reports a qualitative study conducted at two Sino-Western IJVs about how IJVs can help Chinese companies to become innovative. China has easy access to foreign technology, but is weak in its domestic clustering of technology infrastructure. Sino-Western joint ventures are found useful in creating transferable innovation in China. The paper suggests key success factors for creating innovation capabilities through IJV formation.