pressure from foreign rivals were firstly displaced 3 On the other hand the

Pressure from foreign rivals were firstly displaced 3

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pressure from foreign rivals were firstly displaced 3 . On the other hand, the survival indigenous companies which can survive were forced to improve absorptive capacity via inter-firm cooperation (such as forward and backward linkage in FDI). Many local multinational enterprises such as Changhong, Huawei, Haier, Lenovo, and Galanz et al. surviving at that time had significantly benefited from cooperating with foreign enterprises. Therefore, we argue that the effect of FDI is inter-dependent on the corresponding inter-firm collaborations. As indicated in table 1, catching up country has a variety of choices to enhance absorptive capacity. At different stages, absorptive capacity could be developed through an integrative mechanism where national actors complement each other. In other words by taking China as an example, numerous strategies are implemented at the same time by national actors. Firms that have already been relatively technological advanced are preferable to implementing less committed governance modes such as R&D agreement and strategic alliances. Firms that sit behind are on the contrary feel security to rely on stronger ties forming a valid and high committed governance mode, i.e. merger and acquisitions, or joint ventures. At a firm level, each Chinese enterprise has its own learning network with a number of learning partners and learning modes. Firms that can manage its network well and actively play as a network hub or cover network structure hole are able to preemptively grasp technical knowledge and market. Table 1 Strategies used in different stages of catching up Economic Growth Stage Absorptive Capacity Economies’ characteristic Strategies to accumulate knowledge Level of knowledge accumulation Pre-catching up Very low but might be increasing Resource-based; Unskilled labor; Low level of inward technology transfer Low level of Inward FDI and no outward FDI Low but might be increasing Catching up Increasing to reach peak Knowledge infrastructure and domestic industrial capacity; high rate of knowledge accumulation and absorption of external knowledge Assimilation of spillovers from trade or inward FDI; Technology licensing; reverse engineering (early stage) and R&D (late stage);acquisition of technology by M&A Rapidly increasing Pre-frontier declining Assimilation becomes difficult; marginal return of absorptive capacity declining. Strategic alliances; in-house R&D; outward FDI; joint venture Increasing rate decline and reaching the flat range Network leader in Chinese catching up networks are identified having a number of common traits. For instance, they either posit the important interfaces across different sub-network as a broker or connect with almost all the other actors as a center. The involved actors in network include profit-oriented firms, universities & institutes, and western companies doing business in China. Based on the observation on Chinese context, we therefore have Proposition 1
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