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The purpose of this paper is to explore an indigenous innovation phenomenon – entitled the Shanzhai phenomenon – which has emerged in the Chinese mobile phone industry, and to understand its value creation network and operational mechanism, as well as to recognize its policy implications in regional and industrial developments.

Although the Shanzhai phenomenon emerged from the end of 2008, detailed understanding of its systems and operational mechanism is still very limited, partly because of its secrecy and dynamics in the value chain operations. Based on characteristics of the Shaizhai phenomenon, the paper focuses on three levels of the phenomenon – regional historical, regional industrial specific, and typical Shanzhai mobile phone project levels – to pursue a comprehensive understanding of the Shanzhai system and its emerging environments. At the regional and industrial level, the combined approaches of interview and secondary data collection is adopted. At the Shanzhai project level, a case study approach is conducted by focusing on the project and its whole value chain, from the idea creation towards detailed product design, production and integration, as well as its distribution.

Chinese government has called for indigenous innovation to upgrade Chinese manufacturing capability and value creation as well as appropriation. Based on the fast growth of the Chinese indigenous mobile phone industry in the last two years, the Shanzhai manufacturing system is recognized as a new positive alternative way for Chinese manufacturing companies to achieve this aim. Behind the Shanzhai phenomenon, there is a strong globally specialized and collaborated network enabling the down‐stream Chinese small‐ and medium‐sized mobile phone companies to very quickly respond to customers' demands or lead the demands. This new type of alternative innovation system is transforming unaffordable luxury goods into affordable for normal consumers. Because of its mass volume and involvement, however, government policies to harness the energy and development direction become essential.

This research is just a very early stage of preliminary observation. From the methodology perspective, it provides background information about Shanzhai phenomenon and an in‐depth case study about a Shanzhai project. Comprehensive understandings of the Shanzhai phenomenon in terms of its behaviours, systems constructs and patterns, trajectories in the future and implications for policies will be achieved only at a much later date.

ShanZhai manufacturing might be one possible alternative innovative paradigm in some sectors of China.

This is the first academic research paper to offer relatively comprehensive and systematic observations about the emerging ShanZhai manufacturing system in the largest developing country.

The purpose of this paper is to explain the miraculous rise of the mobile phone industry in China in particular and China’s impressive industrial growth in recent decades in general.

This paper uses qualitative or story-telling approach for empirical analysis. Specifically, it uses case studies to illustrate the authors’ arguments.

Utilizing the theory of imitative strategies of latecomer firms and I.M. Kirzner’s concept of entrepreneurial alertness, this paper argues that adaptive entrepreneurs in China’s phone industry survive by being alert to profit opportunities, flexible and adaptable to the changing environments. With limited resources and low technological capabilities at the beginning, Chinese phone makers conduct replication via reverse engineering. Through entrepreneurial learning and imitation, they are able to make indigenous or incremental innovation. The modified models with functions compatible to different groups of consumers and sold at low prices are able to penetrate the low-end markets in the Third World nations.

The authors’ explanation on the success of China’s mobile phone industry sheds light on broader China’s industrial growth as a result of economic reform.

Most studies on China’s mobile phone industry focus on technological analysis, without acknowledging the role of entrepreneurship. This study fills the gap.

To show that Chinese consumers are constantly redefining and revaluing goods along the axes of the real and the false, with little regard for legal definitions of brand authenticity or “fakeness.”

The data was collected through interviews, focus groups, observations, and casual conversations over 16 months of ethnographic research in Beijing, China.

In their everyday consumption practices and navigation of a complex and often dangerous marketplace, Chinese consumers categorize products based on their perceived “truth.” The paper introduces a typology that describes these local categories and explains their utility for consumers.

The data was primarily conducted in an urban capital with a highly educated and high-average-income populace, thus it does not represent all Chinese consumers or a statistical sample.

This paper explains how the same globalizing processes that helped brands establish themselves in the Chinese market now threaten the capability of all brands to gain and retain the trust of consumers

By explaining how new calculations of value are being produced under glocalized regimes of manufacture and distribution, this research makes an important contribution to our understandings of brands and their limits.

This paper aims to study the evolution of innovation-based dynamic capabilities in informal copycat-style firms. As a kind of informal economical organizations, copycat-style firms in many emerging economies play an important role in their development of the economics. The development of Shanzhai firms, Chinese-style copycat firms, from imitation to innovation has become an important micro-foundation of China’s economic growth and the manufacturing development. With the cluster development of the Chinese mobile phone industry as the macro and industrial environment background, this paper chose Beijing Tianyu Communication Equipment Co. Ltd as the typical example of innovation in Shanzhai firms and studied the evolution of innovation-based dynamic capabilities in this company.

This paper chose Beijing Tianyu Communication Equipment Co. Ltd as the typical example of innovation in Shanzhai firms and studied the evolution of innovation-based dynamic capabilities in this company by adopting the leading-edge dynamic capability theory, innovation theory and industrial cluster theory. The authors further discussed how to improve the dynamic capabilities in Shanzhai firms in China.

It is finally suggested that Shanzhai firms should reduce innovation failures and lower damage degree of dynamic capabilities through consistent innovation and paying attention to their innovation improvement.

It will be very significant to research the survival or diminishing of Shanzhai firms from a theoretical perspective, which will eventually enhance property right protection and innovation development in China.

The purpose of this paper is to explore a way to reshape the business ecosystem for existing industries by comparing traditional and Shanzhai networks in China. The research is also conducted on the supporting activities by service intermediaries in the ecosystem.

This research starts with a literature review on firms' strategy of industry maturity from three perspectives, including technology orientation, innovation orientation, and network orientation. The approach of multiple case studies is adopted to unveil the reshaping process of the business ecosystem. Two types of networks are mapped: the traditional mobile companies' network and the Shanzhai network. Intra‐network and inter‐network cross‐case analyses aim to generate the research findings and provide implications for different ecosystem players.

First, the relationship between industry and the business ecosystem is placed into a two by two matrix. Second, in order to reshape the business ecosystem, the traditional network prefers geographical dispersion to other countries to establish a new ecosystem, whereas the Shanzhai network brings niche substitutes to cut down industry entry barriers. Third, government agencies, as one of the service intermediaries, not only support the traditional network dispersion by providing preferential policies, but also support the reshaping process enabled by the Shanzhai network with legal guidance and resource capture. Fourth, other service intermediaries such as law firms, technology services, talent searchers, financial and industry associations, have greater impact on the Shanzhai network than on the traditional network. Fifth, from the comparison between these two networks, strategies to reshape the ecosystem can be differentiated in five aspects: frugal solution, platform enablement, organization recentralization, downstream innovation, and regulation adaptation.

This research further develops the observations into service intermediaries not only in core business but also in the extended level of the business ecosystem. The Shanzhai phenomenon also provides an excellent example implicating classical theories like cluster, innovation and global manufacturing virtual network. From a methodology perspective, this research combined the roadmap methods and cross‐case analysis. However, this study focuses more on Shanzhai network study than the traditional network.

Five nurturing strategies implicate small firms in the Shanzhai network and large firms in the traditional network as well as service intermediaries.

This paper is the first one to deeply study the relationship between industry and the business ecosystem in China, and the reshaping process of a mature business ecosystem from the traditional network, Shanzhai network and service intermediaries' perspectives.

In any time and space and under any circumstance, we find peasants are never passive actors in their livelihoods and rural development. Instead, they always create space for manoeuvre in order to make changes. This chapter analyses the innovative actions taken by the majority of rural inhabitants in rural areas during the overwhelming modernization process, so as to affirm that peasants are the main actors of rural development. It is they who have shaped the transformation of rural societies and the history. Through the analysis, this chapter concludes that rural development is not an objective, a blueprint nor a design. It is not the to-be-developed rear field in modernization. It is not the babysitter for cities, nor a rehearsal place for bureaucrats to testify their random thoughts. Rural development is what peasants do. The path they have chosen reveals scenery so different from modernization. If we regard development as a social change, or a cross with influential meanings, we could understand rural development as peasants’ victories over their predicament. Villages accommodate not only peasants, but without peasants villages would surely vanish. In this sense, the most important part in rural development or rural change is peasants – their conditions and their feelings.

This study aims to investigate whether frugality increases customer complaints via the mediating role of the zone of tolerance (ZOT) of quality for Shanzhai products. Additionally, the study seeks to explore how customer empathy as a boundary condition affects the relationship between the ZOT of quality and customer complaints.

Based on the purchasing data of 241 low-income customers from business-to-consumer (B2C) e-commerce and social platforms in China, hierarchical analysis was conducted in the study. Moreover, “PROCESS SPSS Macro” was used to test the mediation effect of the ZOT of quality and the moderated mediation effect with customer empathy as a moderator.

The results indicate a positive impact of frugality on customer complaints, which is mediated by the ZOT of quality. Moreover, with an increase in customer empathy, the negative effect of the ZOT of quality on customer complaints increases, and the positive influence of frugality on customer complaints, through the mediation of the ZOT of quality, also becomes stronger.

Drawing upon the principle of cognitive consistency, this study not only extends the stream of research on frugality by exploring how frugality influences customer complaints via the mediation of the ZOT of quality but also sheds new light on the research on customer empathy by exploring its moderating role in the relationship between the ZOT of quality and customer complaints.

This is a special issue of Chinese Management Studies and this study aims to engage with debates on innovation in China and to provide new insights for innovation research in the context of China, seeking to develop a greater understanding of the concept of “innovation with Chinese characteristics”.

This study reviews the Chinese innovation management literature in general and the selected papers in this special issue in particular and proposes two new directions for future research.

The nine papers that constitute this special issue present research on important aspects of innovation in China, ranging from the effectiveness of government subsidisation for innovation, the impact of fiscal decentralisation on innovation, the role of management behaviour in promoting (or discouraging) innovation and the effects of differing business models on innovation. These papers shed valuable new light on the theory and practice of innovation in China. The papers are discussed in the context of four primary arguments about innovation management in China identified from the broader literature in the field. These relate to the pattern of China’s innovation performance over time, the reasons for its effectiveness, the role of alliances and influences of indigenous factors. It is also shown that management of the internationalisation of innovation and of efficient internal innovation are two important directions for future research on Chinese innovation in an era of de-globalisation.

The studies presented here provide valuable contributions to theory building in innovation research, as well as some important ideas for directions of future research on innovation in China in the new era of de-globalisation.

The objective of this chapter is to interpret a supply chain as an ontological entity with being-in-the-world of spacetimemattering. A case study approach is adopted to reveal the strategies undertaken by one of China’s fastest growing Internet companies – Xiaomi Inc. – to create competitive advantage through its management of product design and supply chain integration. Utilizing publicly available data, we analyze the company with quantum storytelling and network analysis techniques. Our analysis concludes that Xiaomi’s success originates from two aspects. First, Xiaomi is a good storyteller, who makes stories appealing to customers by involving them into product design and branding. Second, Xiaomi’s parsimonious supply chain substantially improves its market responsiveness and reduces disruption risks; more importantly, it helps to offer products of great value to customers.