Basic Concept of Innovation Adoption, Research Model & Hypothesis
Endogenous Innovation
Perhaps Huawei’s most significant sustainable advantage stems from the fact that it consciously chose to develop its technology in house rather than by the more popular and government encouraged way of joint ventures with foreign partners. Huawei learnt basic products through reverse engineering, using that foundation to attempt more complex products that did not exist from Chinese domestic companies. While Huawei could easily have acquired more advanced technological knowledge by partnering, Ren was convinced that this would have been an obvious paradox: to compete in the international market, Chinese companies often partnered with them in the hope of acquiring advanced technologies and capabilities. As this is not in the long-term interests of foreign companies, they tended to bring older generation technology or insignificant components into the joint ventures. Thus, Chinese companies would not only miss the technology they were after, but they would also lose market shares to their stronger competitors. Huawei was able to leverage its advantage of an easy access to a great number of highly educated and cheap engineers, so that even during the company’ early years it had a high ratio of R&D staff to other employees: 500:200.
On the other hand Huawei’s technology development has also been controversial, and there have been accusations that Huawei used improper technology acquisition to accelerate product development. Cisco as well as Motorola sued the Chinese company over the theft of intellectual property. Even though reverse engineering and stealing of technology are not unique in this industry, these concerns have followed Huawei as it has sought to raise market penetration in the US.
Perhaps Huawei’s most significant sustainable advantage stems from the fact that it consciously chose to develop its technology in house rather than by the more popular and government encouraged way of joint ventures with foreign partners. Huawei learnt basic products through reverse engineering, using that foundation to attempt more complex products that did not exist from Chinese domestic companies. While Huawei could easily have acquired more advanced technological knowledge by partnering, Ren was convinced that this would have been an obvious paradox: to compete in the international market, Chinese companies often partnered with them in the hope of acquiring advanced technologies and capabilities. As this is not in the long-term interests of foreign companies, they tended to bring older generation technology or insignificant components into the joint ventures. Thus, Chinese companies would not only miss the technology they were after, but they would also lose market shares to their stronger competitors. Huawei was able to leverage its advantage of an easy access to a great number of highly educated and cheap engineers, so that even during the company’ early years it had a high ratio of R&D staff to other employees: 500:200.
On the other hand Huawei’s technology development has also been controversial, and there have been accusations that Huawei used improper technology acquisition to accelerate product development. Cisco as well as Motorola sued the Chinese company over the theft of intellectual property. Even though reverse engineering and stealing of technology are not unique in this industry, these concerns have followed Huawei as it has sought to raise market penetration in the US.