ENTREPRENEURSHIP & INNOVATION OF HUAWEI TECHNOLOGIES CO. LTD IN CHINA

Research Background

The economic growth of China, over the last few decades, has been staggering and is considered as one of the emerging and most powerful economies of the world (Ahrens, 2013). The major power of the Chinese economic growth is conjoined with its mass selling power and arbitrage activities (price difference between two markets) (Zhang, 2017). The low labour cost has earned China a very unique and powerful position in the global corporate market. It is quite recently that the focused has been shifted from mass selling to technology innovation (Ahlstrom & Ding, 2014). According to Wong, et al. (2005), the Chinese market can be deemed as the technology followers, which imitate technologies developed in the leading markets. This is the second or mediocre level of technology development and innovation, the first being of simply selling the discarded and used products imported from the developed countries. Many economists believe that if a country is not moving forward, it is basically moving backwards as other countries will take over them (Leff, 1979; Wong, et al., 2005). This proposition is one of the primary motivations behind China’s commitment to entrepreneurship and transforming from an innovation follower to an innovation leader.

The economic reform in China was observed in 1978, when the Chinese government adopted a number of developmental policies, following the Soviet central planning model (Tang & Hussler, 2011; Zheng, 2010). It was after this transformation that individuals, who had little resources, were encouraged and supported by the government and other financial institutions to start their businesses and create more jobs for the locals. The commitment of the China towards entrepreneurship was not confined to easy licensing alone, but developing the R&D sector of the country as well (Rethel & Sinclair, 2014). The fact that innovativeness is the key to successful entrepreneurship, the government’s vision was quite clear and vibrant. From 1995 to 2005, China had 19% growth in its R&D budget, reaching US$30 billion per year. This figure has increased unremittingly since then with the current investment of just under US$31 billion (by 2012), with an annual growth rate of 1.97% (Minin, et al., 2012; Zhao & Pira, 2013). Thus, the Chinese market represents a great potential for studying entrepreneurship and innovation and also the transition from the conventional business model to the ‘entrepreneuristic-model’ as many firms are still on the verge of this transformation (Liu, et al., 2011). The current report will endeavour to dig deeper into the concepts of entrepreneurship and innovativeness and how China has embraced it, using the Huawei Technologies Co Ltd as the case study.

Why Huawei?

Huawei, which is commonly been referred as the sleeping giant awakened, has grown to become the largest telecom vendor and Information Communication Technology (ICT) developer in China (Ahrens, 2013) and the third largest telecom vendor in the world by revenue (Low, 20007). Founded in 1988 by Ren Zhengfei, Huawei was basically a low-priced phone (switches) distributor, targeting regions of China, which have been neglected by the large companies (Liu, 2013). The transformation of Huawei from a low-priced and mediocre quality phone distributor to one of the leading giants in the smartphone and telecommunication network industry makes it an appropriate company for analysis in the present study (The Indian Express, 2010).

It was during the years 2004-2005 that the company first came into the limelight when it reported annual sales of US$5.58 billion with an 81% increase from its sales of 2001 (Low, 2005). This was the time when several other cellular giants like Motorola, Alcatel, and Lucent reported a decline in their sales and revenue performances (Liu, 2013). According to Low (2007), the major credit should be given to the R&D and innovation commitment of Huawei, investing over 8% of its total revenue (US$480 million) into the R&D budget (Huawei, 2013). Apart from this, the entrepreneurship approach of the company allowed them to broaden their horizon and gain a multifold increase in their market share and revenues (Luo, et al., 2011). Thus, Huawei presents a strong case study for better understanding the implementation of entrepreneurship and innovation into the real corporate world.

Problem Statement

Though, China’s economy has remained both stable and promising over the last four to six decades, it has recently shown signs of a slight turmoil. The 10.4% growth rate seen in 2010 has declined to 6.9% in 2015 (Zhang, 2017). Of course, fluctuations in the economy are quite common and it is not the first time in the last four decades that China has experienced an economy slowdown. However, this time the economic decline might be conjoined with more concerning factors, which would not stabilize automatically. Cai et al. (2012) claim that the latecomer advantage of the Chinese firms is being marginalized by the shrinking cost gap between China and other developed countries. Thus, in future, it is quite possible that China can no longer depend on its arbitrage activities, which currently plays a central role in its technological industries. This necessitates the march towards visionary entrepreneurship through innovativeness. As China comprises of more than 62% SMEs, still relying on the conventional business approach (Zhao & Pira, 2013), it is high time to extract lessons from firms, who have been successful in their innovation and entrepreneurship abilities, and guide the limping firms of China.

 

 

Research Aims and Objectives

The primary aim of the study is to look at the technological and entrepreneurial evolution and expansion in China, using the Huawei Technologies as the research lens. The pursuit of this research aim, the research will shed light on some of the recent technologies of Huawei to get an idea of their commitment and approach towards innovation and entrepreneurship. Based on these research aims; the study will try to cater the following objectives:

  • To analyse the premise of entrepreneurship and innovation in the context of China.
  • To shed light on the technological advancements and entrepreneurial skills of the Huawei Technologies Co Ltd.
  • To understand how commitment to entrepreneurship and innovation can lead to economic transformation, using the case study of the Huawei Technologies.

Theoretical Framework

There is no dearth of theories and theoretical models in the domain of entrepreneurship and innovativeness; however, there is one theory that binds both these concepts together. It is the “Opportunity Theory of Entrepreneurship (OTE)” also termed as the ‘equilibrium destruction theory’ presented by Schumpeter (1999), which rests on the principle that entrepreneurship is not about earning, but about being the innovative leader. The premise is further explained by Sledzik (2013), claiming that OTE does not deny the premise of wealth accumulation or gaining social power, but asserted the significance of economic leadership rather than being part of the equilibrium and do not risking the position due to the fear of finical loss. This theory suits nicely to the present discussion, which stresses on being a technology leader than a follower and also moving out of the equilibrium by investing in innovative abilities of the firm or the human resource.

The OTE approach is used in amalgamation with the “Knightian Theory of Entrepreneurship”. According to Knight (1921), risk, uncertainty, and profitability are the three core domains of entrepreneurship, and if any single domain is missing, the entrepreneurial model loses its essence. Bull and Willard (1993) explain that if a business is based on imitation rather than innovation, it is not an entrepreneurial model in the true sense, but simply a corporate model. In such a model, the scope of thinking and innovation will always be limited as it will be guided by a technology leader and the fear of deviating from it. A true entrepreneur understands the position, significance, and content of each factor in the business model and guides the firm accordingly.

Research Rationale

China economy and corporate structure are on the verge of transformation from being a latecomer to an innovation leader in the global market. However, the global examples and pioneers of the entrepreneuristic business model might not be relevant to the Chinese context, and this is one of the reasons for the reluctance of many Chinese firms and SMEs to be a part of this economic transformation (Liu, 2013). Huawei, a Chinese firm with headquarters in Shenzhen, on the contrary, presents a more recent and germane entrepreneuristic and innovation model for the Chinese firms to follow. The lack of studies addressing the entrepreneurship and innovation issues in the Chinese market add to the rationality of the present study (Phan, et al., 2010). By using Huawei as a case study, the vision and approach in becoming an innovation leader can be comprehended, which can help firms struggling to transform to the innovation-based business model.


 

Methodology

The present study will use the “Explanatory Case Study” approach to address the research objectives. The case study approach preferred when the aim of the study is to develop empirical data related to contemporary issues, business process, or more specific details like technology usage and business strategy. Rowley (2011) claims that one of the primary advantages of the case study approach is that it limits the scope of the study and adds to the depth of discussion. Thus, rather than discussing the entrepreneurial and innovation efforts of China as a whole, limiting it to a single company, Huawei Technologies, will help present a more rigorous discussion of the topic. Using the explanatory nature of the case study, the case scenario will be used to answer the research proposition: the need and challenged in transforming from the latecomer model to the innovation-based business model (Cai, et al., 2012). Both primary and secondary data will comply with the case study approach (Saunders, et al., 2007). The primary data will be collected through descriptive or semi-structured interviews using channels of emails, telephonic conversation, and/or Facebook/ Skype call.

 

 

References

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