Abstract

This paper explores reports on a qualitative study that was done in a span of two decades;
reporting on the government of China and the state of the innovation in the state. Moreover,
these reports speculate the on the integration of the various ventures the government utilise in
the management and trigger of the rate of innovation. Covered in the paper are also the
various aspects of the mobile industry in China. The paper explores the telecommunication
history that the country has encountered. Explicitly the paper covers the domains which the
government of China has put more emphasis. The implication of the policy making and the
process that the policies are made, also shows the relationship between the policies and the
management and the creation of the innovations. For the last two decades the
telecommunication of china’s has experienced an incessant growth, with the government
playing a vital role in the implementing of this; shaping the significant industrial sectors.
Finally, the papers scrutinise the advantages and the disadvantages of the application of the
joint ventures by the government to enhance innovation in the country.
Key words: smartphone manufacturing, regulations,
1. Introduction
At the moment, China is the largest smartphone manufactures as well as exporter with a
stable revenue growth from this sector, and the Chinese government plays a major role in this
(). The strong commitment by China’s government to enhance the country’s network
infrastructure and also to relax policies greatly contributes to the growth of the industry. In
2005, China’s government put an end to the licensing condition for smartphone
manufacturers and instead introduced an efficient new registration process alleviated the rules
and regulations required to be satisfied in order to set up a smartphone manufacturing
process. Regardless, the smartphone business in the country is capital intensive which
requires serious investment channelled towards research and development, development of
distribution channels, equipment, marketing efforts and promotion. According to (), the
technology in the smartphone industry is undergoing rapid changes hence manufacturers face
the challenge of constantly evolving as well as adapting to the new technologies in order to
maintain their competitiveness.
Furthermore, the revenue for manufactures of smartphones in China in volatile based on the
fact that it heavily relies on exports thus factors that export-import policies and global
recession can impact the revenue streams directly. The main regulatory body in China is the
China Ministry of Information which is in charge of all the rules as well as regulations
concerned with the manufacture of smartphones. While the general rules needed to be
fulfilled by a smartphone manufactures in China are welcoming, they are also tough and have
been consistent for the last decade. Therefore, based on the constant advances and
innovations , high competition, the regulations in place and the high requirement for capital,
it is clear that there are high entry barriers into the smartphone manufacturing industry hence
the success of a manufacturer requires focus on constant innovation, brand growth and
promotion, cost control and high quality control measure in place.
This paper utilizes a systematic review to analyse the role of the Chinese government in the
mobile phone industry due to the complexity of policies’ influences and a series of historical
changes in those policies. The systematic review will be focusing on:
1. The relationship between the government (state) and innovation;
2. The evolution of the Chinese government’s policy in mobile markets
3. Current situation of Chinese mobile industry.
4. Building a model of how the Chinese government exert influence on the innovation
capacity of Chinese mobile industry, based on existing analysis and information
searched.
5. A series of analysis around advantages and disadvantage of this mode.
The paper systematically explores the funding process that is put in place by the government
of China. Then the paper brings a detailed evolution of the modern policies dating back in the
beginning. Thirdly, the paper outlines the current situation in the Chinese market and the
constraints faced by the market. With the aid of joint venture model, the paper discusses how
the government of china catalyses the innovation rate and finally the paper explores the
advantages and the disadvantages of the applicability of the model.
2. Methodology

As to conduct a proper systematic literature review, the utilisation of Kitchenman protocols

Therefore, a procedure for literature exploration was expressed about our investigation queries. The
protocol dictates the search terms to be applied, search engines to be used and the sources to be
applied.

2.1. Search process

The applied search engines were:

 Google Scholar http://scholar.google.com.au
 ACM Digital Library http://dl.acm.org
IEEE Digital Library: http://ieeexplore.ieee.org
The whole search process was conducted online. however, there was an attempt locate and retrieval
of information using the keywords like “smartphone”, this almost led to a failure the for term was
not widely used in the cited articles; thus the possible option was to use the word mobile instead.
This led to a conclusion that the papers that are published as prior the year 2007, as some of the
paper had vital information especially on the evaluation of the policies in china.
Table 1 number of papers from each search engine

Digital Library Number of papers retrieved

Google Scholar 27
ACM Digital
IEEE Digital library
2.2. Quality assessment
The assessment was based on how well the paper answered the question. All the cited papers
had qualified with the rate of above the average as the paper did contain quality content.
3. Literature Review
3.1. The relationship between the government (state) and innovation
Although significant differences in the society structure and the strength of the governments
broadly exist in the worldwide due to the diversity of political system, many studies indicate
that the national innovation system usually has considerable power in diffusing innovation
and creating innovation. The government is almost the sole role which has the ability to
provide innovation with comprehensive help in many direct factors and indirect factors in the
long run (Landes, 1970, cited in Freeman, 1995, p.7). As the vital part of the national system
of innovation and regional system of innovation, in the worldwide, the government usually
has various ways to influence the innovation performance of an industry. Many scholars have
already indicated diverse ways that government can utilize around the innovation. Landes
(1970, cited in Freeman, 1995, p.7) pointed out that the government own the power to
improve coordination among different innovation factors. Later, Chung (2002) farther
analysed the base of this coordination and argued that this coordination can be improved by
enhancing communication and trust among innovation actors. The government mainly has
three functions related to innovation which includes acceptance of knowledge from frontier
countries, improving the diffusion of innovation inside domestic innovation actors and
incentive to create innovation.
3.1.1. Acceptance of knowledge from frontier countries
The Chinese government, has ensured both regional and global collaboration Marc (Bourreau
and Pinar, 2001). These affiliations assure the government acquisition of relevant information
and skills that aid the thriving of the state’s innovation. To a greater extent the government
has formulated policies that will embed both parties to share knowledge and impact skills.
Most of these policies enable the China government to access to external capital and
technological knowledge. Indeed, the government of China has fostered the emergence of the
state to be as a vital Research, Development and Innovation (Rand DandI) in the global
distribution of knowledge. Consequently, establishment of concrete affiliations between the
state and technological institutions across the globe. (Grace, 2009)
3.1.2. Improving the diffusion of innovation inside domestic innovation actors
This section explores the researchers mobity of acquisition of technological knowledge,
especially the collaboration of the European states and China (Johannes, 2013). The
collaboration has improved the exchange of information between the parties. For instance,
some of the exchange programs include: joint programmes like the PhDs and masters, joint
research and development programmes and creating and maintaining of the research and
development centres (Bourreau and Pinar, 2001). Additionally, the partnership has enhanced
over the decades the coverage of vague area of research, hence deepening of the
collaboration. For instance, the collaboration had goals to be attained; Sustainable
Urbanisation. In accordance to the context of the collaboration, it was agreed that via the
research and development pillar that the goal should commence as soon as possible as to
handle the rapid population growth. In May 2013, the main research and the development
topic coverage under this clause of the agreement was: planning of the city, governance and
innovation of the city; green and sustainable mobility and transportation; sustainable
solutions to the energy crises in the cities; and Smart Cities (Johannes, 2013).
The initial of the programmes recounts to finding from the Chinese side, the China-EU
Science and Technology Cooperation Special Program, the collaboration was launched on
twenty second of January, 2013 by MOST, the launches enhance the funding and monitoring
of the of the China-EU Science and Technology Cooperative Projects under the clause of the
Urbanisation and Renewable Energy to health and information and communication
technology (Johannes, 2013). The project requires a minimum of two European partners and
also a minimum funding of three million RMB is for the government of China side only.
Notably, the government of China has collaborated with other states, the international
RandDandI collaboration has unlocked innovative chances for the state, specifically to
enhance global affiliations as to ensure involvement in the development of co-operative
venture, services, productivity and business methodologies, especially the for the Chinese
SMEs that will highly benefit from the exposure of the knowledge and other resources
attained via the consortia (Grace, 2009).
Arguably, China highly depends on external technology. The higher percentage of the
companies assimilated or develop knowledge sourced from without companies. The
indigenous knowledge is highly disrupted by the presence of high number of foreign
countries. These multinationals companies are highly, distorting the knowledge and
technology slipover, hence frustrating the leadership of the state in the diffusion of the
knowledge. Furthermore, academicians and policy makers are criticizing the attendance and
behaviour of the influence of the foreign knowledge (Andrea, 2010).
As to enhance the diffusion the state government has integrated new policies, therefore,
aiming at the establishment of the indigenous technology platform hence, enabling the
presence, creation, development and diffusion of the China knowledge. For instance,
ensuring that China is setting standards for the production of the consumer’s products
(Johannes, 2013).
The government of China wants to counter the dependence of the foreign knowledge and
technology, for the foreign know-how dominate the most crucial part of e country. The
government has capitalised on the assimilation of the fifteen year p0a that was commence in
the year 2003. The plan, is determined to strengthen the country’s capacity of knowledge and
innovation. More so, the plan encourages Chinese firms to attain and enhance the
development of the domestic knowledge. Under the Government Procurement Agreement,
the country has immensely used the agreement a to improve of the innovation in the country
with the domestic knowledge (Grace, 2009; Johannes, 2013).
China’s Research Policy, has strongly propelled the exchange of knowledge. In that it
approaches the science and technology as a multifarious asset that can be utilised in the state
(Grace, 2009). Efforts to upsurge China’s innovative fortes has been propelled by the
dedication of enough money to the creation and maintenance of the repositories, laboratories
and science packs. This has incessantly improved the transvers of the knowledge to all parts
of the state. The government to great extent the company has embarked on the improving the
innovation capacity of the state by banking of knowledge attained both local and
internationally. Consequently, the government has to ensure the proper diffusion of the
knowledge attained.
3.1.3. Incentive to create innovation
Under this juncture there is exploration of the instrumental policy available for the financing
of research and development as well as the innovation. There are multiple sources of funding:
government financing and private funding; banking, angel investment and venture capital.
Government financing
Even though, the existence of different government funding strategies for firms, it is highly
noted that the Innovation Funding for Small Technology-based Firms-InnoFund and the
obtainability of revenue inducements for high technology and new technology firms located
in a particular part such as Science Park. InnoFund, is maintained and run by the government,
with an objective so sustain the SMEs that focussing on the creation and development of high
technology in the research and development domain (Grace, 2009). For instance, in the firm
the Chinese equity in the company must be more than half of the workforce and emphasis is
put to the high technology and new initiatives as well as new entrant funded by international
returnees.
Tax reduction is imposed on the firms that are with the aim of attaining the new innovation
schemes. The government has been using this scheme to lure most of the companies to attain
the improvement of the capacity of innovation (Andrea, 2010). Otherwise, this has been
acting as an incentive benefit to the companies that are enrolling in the Research and
Development and Innovative domain of the government. For example, instead of being
imposed on twenty-five percent the company adheres only fifteen percent of the taxes.
Moreover, the company is entitled to exemption of taxes for two years and fifty percent
deduction for three years if located in particular locations like the Science Park (Johannes,
2013).
The Chinese government is considerably the main source of funding to a higher percentage of
the firms. It has been pointed out of the large portion s of the incentive are the allocated to
universities and big research centres rather than private companies (Grace, 2009). Although,
the existence of the government funding strategy of the companies, there is existence of the
bureaucracy to acquire funds and that small level of financing granted per scheme does not
reimburse the effort obligatory required to get it (Johannes, 2013). However, there is a lot of
limitation for foreign firms, nevertheless there is an outline incentive for foreign owned
Chinese companies that want to commence new business. For instance, access to buildings
and tax refunds.
Bank financing
As a result of this, private companies result to other source of funding; Bank Financing. The
state owned banks in China overlook the financial domain, the bank provides the loans at
very low rates, which is subjected to suffer credit scarcities, especially those that are at the
domain of the Resources and Development (Grace, 2009). These loans that are obtained at
the rate of twenty to twenty-five percent of bank loans. Even if this is said to be an incentive
this system is not highly integrated as most of the companies under the domain do not rely on
it (Grace, 2009).
Venture capital
Venture Capital in China, this methodology the government has commence to utilise in the
promotion and exponential of the indigenous innovation as well encouraging both the
maintenance and the creation of the knowledge repositories (Jun Xia, 2007). This system is
classified as the major contributor to funding together with foreign funds. The integration of
the system by the government has enabled it to fulfil the main aims, which aims at attracting
innovation and a rapid growth of the of the domain, particularly the companies that have
ventured in the development of the high technology. Apparently, the system provides a
gateway for investors to regain their investments through an Initial Public Offering exist. This
fact about the scheme act as an incentive in the promotion of innovation and appraisal of the
innovations. The reaming of the potential of innovation in China attracts a lot of investors as
they cannot speculate the final outcome NDRC and Treasury, 2008. Nonetheless, at the early
stages of an invention there is minimal or none capital; as there are less entrepreneurs that are
willing to invest in the project.
Angel investment
Another incentive manner that the government of China has assimilated is Angel Investor. As
a result of incessant growth of the globe and the China’s economy, though new a higher
number of Angel Investors are eyeing the state. Since the year, 2008 the state has
accommodated high number of investors because on the same year there was the launch of
the China Business Angel Network (Grace, 2009). The network is accountable for the
findings where necessary, expertise in selection and capitalisation in areas of venture and
supporting the promising projects from the early levels. The company has established branch
in the China as to enhance the communication among the inventors and the local.
As a result of the establishment of the domestic Angel Investment, a lot of companies under
the domain of research and development have attained the required finances and have
immensely succeeded. This has really improved the rate at which the government offers the
incentives, a lot of people are awarded curtesy of the company. Even though, the applicability
of the investment to most parts of the state is scarce, the government is trying to supplement
all the activities to spread the jurisdiction to marginalised areas.
3.2. The evolution of the Chinese government’s policy in mobile markets
The policy making and the development of the telecommunications; mobile markets has
undergone evolutional sequence that has made the market ranked amongst the best in the
global market. In the year, 1980, he teledensity in China was at the rate of 0.4%, this resulted
from the lethargic development that commences in the seventy’s (Arcangcli, 1993). However,
this rate was considered lower as compared to other states. More so, the international
telephone service was stretches in a particular location, thus limiting the coverage across the
cities (Patton, 1990). At this era telecommunication was taken to be only for military
utilisation only; neglecting the commodity aspect of it (Amann et al.,1979). At this period,
the economic returns were very minimal, thus the government had to formulate and
implement policy, which subsidised the telecommunication services switching it with the
postal services. Ministry of Post and Telecommunication, at this juncture had merged the two
services and operated them as a single unit, the ministry was later renamed to Ministry of
Information Industry (Grace, 2009).
In 1978, the government restructured the economic system, where by there was a realisation
that the telecommunication infrastructure was poorly erected (Amann et al.,1979). Moreover,
the industry was clogged with deterred foreign companies thus disputing the local companies
in the market. Therefore, to uplift and sustain the local industries the government formulated
the policies that strongly, were hinged on the development of the telecommunication industry
(Arcangcli, 1993). These polices were as preference choice granted to the Ministry of Post
and Telecommunication namely the ninety percent’s policies: ninety percent of the gross
profit should be retained by the local provider of the service, whereas the ten percent of the
profit should be incurred as the tax unlike the usual fifty-five percent as pensioned on the
industries (Antonelli, 1994; Amann et al., 1979). Then, ninety percent of the returns obtained
as result of foreign exchange raised by the enterprise (Antonelli, 1994). Ninety percent of the
investments of the central government were to be considered un-repayable loans.
Additionally, in 1980’s the government of China commenced the implementation of
particular market structures in the sector of telecommunication infrastructure as to reinforce
the preferential policies dogmas (Archibugi and Pinta, 1992). The main impacted domains
that called for agency of reforms were highly pegged on the decentralisation of the
administrative authorities and the lower government stratums, the structuring and
maintenance of the market relations, the convection of delegation of accountability in the
performance to enterprise and equip the mangers and structuring of the incentive and rewards
system.
A well outlined scheme included the Contractual Responsibly System, which utilises the
contracts platform to enhance clarification on the range of success of the and chances of
failure regardless of any level of the hierarchy and then decentralised authority in accordance
to the echelons (Baba, 1985). The director of the programs, has the responsibility to
communicate manually to the government as to filter all the rigs are encountered that are at
different levels of communication (Patton, 1990). Via the negotiation, aims such as the
traffics, profits, revenue, quality and efficiency objectives are contractually conceptualised.
More so, quantified are the reward and forfeit measures. Material incentives, that were
neglected in the past are highly assimilated is the reward giving. As to define the terms of the
contract, on the dividend allocation, an economic performance of all the parties in the
affiliation is mutually and well measured (Patton, 1990).
The implementation of the policies and the triumph of the of the reforms has immensely
impacted the growth of the market. In contrary, the profit that is attained from the industry
has been used to subdue the postal service, for instance, in the year 1992, the subsidy was
over six billion Yuan (Arcangcli, 1993).
The sustainability of the local demand in China was finally subsidised in the year, 1994. This
was declared by the former Ministry of the Telecommunication, after a thorough examination
on the integrated infrastructures. The examination curtained the government the satisfaction
of the demand locally. This was the turning point of the industry’s market; shifting from the
sellers’ market into buyers’ market. The government commended the attainment, more so the
this immensely contributed in the acceleration of the development in the market. The domain
was shifted into a robust market-oriented industry (Jun Xia, 2007). Operational effectiveness,
became a paramount factor to be considered, hence the government realised a tremendous
growth in the industry of telecommunication (Grace, 2009). As a result of the policies the
government was able to oversee the growth and was able to manage of the industry. He
formulation was flexible to adapt to various situation and endeavours of the market. The
ninety percent rule is flexible to adapt even when the sales are very low.
As to ease the shifting from support-propelled growth, the government of China has swiftly
withdrawn the preferential policies that were granted to the industry and therefore the
government has opted to deregulate the telecommunication market (NDRC and Treasury,
2008). This resulted to venture of joint ministries; China Unicom. The establishment of the
union was an elevation of the industrial into some huge market opportunities. More certainly,
it hastened the process of discontinuity in the telecommunication policy away from the
traditional method that insisted in the centralised monopoly approach (Grace, 2010; NDRC
and Treasury, 2008).
Although, the largest barrier for that result to failure to full exploration of the subscribers, is
then ineffective regulatory structure. The regulatory structure comprises mainly the
structuring of the policy (Noama, 2010). Despite the fact that China Telecom was still acting
as the operational arm of the government, which the it was under the Ministry of Postal and
Telecommunication. This Ministry was the regulatory body and the operator. This policy was
speculated to be null, as it was validated that it was highly making the operation ineffective.
The ineffective framework, put China Unicom at highly disadvantaged position, particularly
hindered and at times distort the network interconnection (Noama, 2010; Edward and David,
2009). As a result, all the stallholders have strongly appealing for the restructuring and
amendments to be implemented in heist, of the policies.
Furthermore, the incessant hasty development of the private owned networks, particularly the
cabled network, where by there was an alarming concern to the govern over the duplicative
construction (Edward and David, 2009). The Ministry of Radio Film and Television, raised
an issues on the provision of the poor quality services by the China Telecom. Tus, as the
government to curb the exist of ministry and fleeing to the private owned companies, the
government opted to restructure the regulatory policies. This aided in the defending of the
investment the government had invested twenty years ago in the public telecommunication
infrastructure (Edward and David, 2009; Grace, 2009).
3.3. Current situation of Chinese mobile industry
The Chinese mobile domain is a dynamic and vivacious for a lot of foreign companies
(Grace, 2009). The China’s World Trade Organisation validation can be stipulated as a
tremendously rich set of chances for foreign investors. In additional, it harbours vicious
threats to domestic mobile firms offered to the foreign competition (Jun Xia, 2007). Chin
joining the World Trade Organisation was a major leap to the current state of the mobile
industry. However, the membership came along with some constrains like, for China’s
initiative, it will undergo a lot of competition. Several years ago have gone by but still,
Chinese enterprise still stands to be the majority cooperation in the market; they are namely,
China Telecom, China Netcom, China Mobile and China Unicom (Johannes, 2013).
As of now China Mobile and China Unicom companies are still the only two licence holders
that are legally permitted to carry out phone services (Noama, 2010). Though, currently there
was an introduction of a new substitute in the existed market called the Xiaolinglong. The
new entrant is being operated by the two companies namely: China Telecom and China
Netcom. It assumes the responsibility of the wireless services to the wired telephone system
(Noama, 2010). Moreover, the company does ensure the provision of cheap and quality
mobile services to the consumers; this is attainable as the company banks in the fixed-line
networks within a particular geographical location. The company has applied the mobile
phone technology, but permits roaming in the city, for it operates like a mobile phone the
company has highly impacted the mobile industry (Noama, 2010). The joint venture is facing
unbalanced juncture where by on one side the companies have attained stiff competition
advantage whereas on the other side the company encounters threats of extinction by the
China Telecom and China Netcom (Grace, 2009).
The integration of several strategies has significantly shape the status at which the market is
at currently. Additionally, the introduction of the fourth generation in the market has really
introduced changes in the environment of the market. The presence of the government in
monitoring and the manipulation of the market has enhanced the implementation of standards
(Noama, 2010; Grace, 2009).
Currently the market has diverse in accommodation of oligopoly (Edward and David, 2009).
In economics explanation, this is a situation in market in which governing over the supply of
a product is under the dictatorial agenda of a very small number of producers and they have
the capability to sway the prices and highly influential to the competitors. As prior seen the
industry is dominated by small number of producers as compared to the rate of demand
which is stiffly high (Noama, 2010).
Another feature of the oligopoly that is clearer in the market is that the dominant companies
offer the same services but the services are differentiated. Particularly, China Telecom and
China Netcom are licences to offer the same product but the companies have branded their
services in a different manner (Edward and David, 2009). The branding of the services
enhances the companies to acquire unique traits that differentiate them from each other.
Moreover, the dominant firms build up constraints that hider the new entrants (Grace, 2009).
These barriers are so high that the new entrants are encountered by low profit margins that
the incumbent flee out to the industry. For instance, China Telecom and China Netcom made
it stiff that the incumbent of the new companies had to be joint venture between China
Mobile and China Unicom as to sustain their existence in the market; Xiaolinglong
company’s survival is currently maintained by the resources of the two companies (Edward
and David, 2009). As a result of polling resources, the company has the capability to absurd
and maintain the stiff competition projected by China Telecom and China Netcom in the
market arena (Jun Xia, 2007).
The third attribute of the current market is that the large portion of the market is assumed by
the dominant companies. China Telecom and China Netcom, are currently the most dominant
companies in the market. This enhances the companies to acquire larger percentage of the
market share (Johannes, 2013; Edward and David, 2009). Currently, the companies like
China Mobile and China Unicom acquire scraps as compared to what the dominant
companies gain (Edward and David, 2009). This make the dominate companies to be highly
influential in the industry as the range at which they serve is higher, hence they have the
capacity to even influence the rate of thriving of a competitor. China Mobile and China
Unicom is highly influenced by the dominant companies; the dominant countries also inflict
the span where the company’s jurisdiction will span (Edward and David, 2009; Grace, 2009).
For example, the company allows roaming in within the city a most of the cities are under the
influence of the dominants (Edward and David, 2009).
China’s World Trade Organisation Commitments, have highly impacted the stature at which
the current market is. There were some changes that came as a result of the commitments to
market. First, there was implementation of low fees imposed in the importation of
information technology products. Secondly, there was elimination of the existence of the non-
tariffs hindrances and there was the commence of the incessant opening up of the domain
(Grace, 2009).
Although the most considered policy, with reference to the mobile industry is the opening up
policy. The mobile services opening enhanced the venture of foreign companies to capitalise
(Edward and David, 2009). For example, foreign investors have the ability to part in the
mobile industry productivity by Equity Joint Ventures all the urban centres stretched across
the state of China. This has enhanced the market in China to stretch across the global market.
Where by the market can be rated as amongst the best in the globe. Although, the market will
be enlarged after the validation of the assimilation of the state by the World Trade
organisation (Noama, 2010).
Competition, market size and market share. Legally, there are only two mobile license holder
that can operate mobile service in the state (Edward and David, 2009; Jun Xia, 2007).
Therefore, the other ventures of telecommunication can be dominated by any other mobile
communication services. Currently, as to utilise any mobile phone the consumer must opt any
of the choices this brings out the market clearly as the oligopoly status. Even though, facing
the Xiaolingtong company stiff competition the company, plays a vital role in the final
products of the mobile services (Jun Xia, 2007).
The foreign investment limitation in China was implemented as a result of commitment
sworn by the state, this is to maintain the situation of the market in China. Though, it is
foreseen that the market of China will change the as the time goes, especially in the China
Mobile Market (Jun Xia, 2007). Once the foreign investors take a company stand in the
market, they can utilise third chances to enhance further development it is mobile services in
future. Therefore, signing strategic affiliations with Chinese initiatives and buying Chinese
initiatives shares a vital methodology for them (Edward and David, 2009).
4. Discussion
4.1. How the Chinese government exert influence on the innovation capacity of
Chinese mobile industry
The government of China has assimilated the model of International Joint Ventures model to
enhance swift. Innovation is the path for sustainability of the mobile industry (Edward and
David, 2009). Thus the applicability of the international joint venture in the Chinese market
has proven to be effective model creating innovation capabilities. Even though, the country
lacks enough innovation. China has an ease access to the foreign technologies, though its
puny in the clustering of the ingenious infrastructure (Zhu, 2004). The internal segmentation
of China has been rapidly developed, these segments are seen to experience an exceeding
growth over very small span of time, thus the country has cherished some triumphant
moments(Mezias, 2000). For example, in the year 2004 the country experienced a Gross
Domestic Products of over one trillion. This enhance the economy of the state in the five
position behind USA. As a result, to maintain the position the country resulted to integration
of the International Joint Ventures. The strategic alliance resulted to the opening
opportunities the innovation domain, mainly the mobile industry as this enabled oversea
markets (Zhu, 2004).
4.1.1. Joint venture model
An international joint venture, is corporate arrangement in which the co-operative venture
parties create a new entity or contractual association and there is sharing of resources. The
open door policy, over two decades ago, opened the China to the world markets. Joint
ventures were the initial investments approaches in the gripping of the Chinese markets. In
the mobile industry, the government applied the international joint ventures to compel
invention in the industry. At this time the central government used the joint ventures as a
means to transmission advanced knowledge and management techniques from foreign firms
to state owned companies. As a result, the foreign investors attain the benefit of the
exploration of the markets a supply chain, more so a lower venture and operative cost, though
the liberalisation of the foreign investors in the mobile industry led to alternative investments
of mobile models and techniques of communication. Some of the projects require Chinese
partners forbidding alien designs, so limiting the number of investors.
Categorically there are two type of joint venture that is applicable in the industry of the
mobile phone industry; Equity Joint venture and Contractual Joint Venture. Both the
compelling of the innovation, where by there is drafting of the contract as the parties involved
to adhere at all cost.
Equity Joint Venture
Equity Joint Venture, are governed by the People’s Republic of China. In this joint venture
both the Chinese and the foreigner fall subject of the law. The law was promulgated since the
restructuring of the economy (Jun Xia,2007). This has enabled the foreign companies to
attain trust to the locals as they are under the scrutiny of the law. The joint venture must
necessarily ne an establishment as the limited as liability incurred by the company, thus
creating a distinction between the legal persons and the investor, with the liability of the
partners limited to the contributions made to the Registered Capital of the Equity Joint
Venture (NDRC and Treasury, 2008).
Contractual Joint Venture
Contractual Joint Venture, is as well governed by the Peoples Republic of China on the
Contractual Joint Venture using Chinese and Foreign Investment. Unlike the Equity Joint
Venture, the Contractual Joint Venture has a considerable freedom to delegate on the rights
and the privileges the parties are to attain with respect to their rights, duties and obligations,
risk sharing of the division of the liabilities, management and ownership of property at the
termination level of the venture. Although the venture was created as the legal frameworks
where by companies could deploy in the management of contracts (Paul and Martin, 2008).
International strategies
The approach of the International Joint Venture, assures a vast number of opportunities for
the firms across the affiliation and to acquire immense sharing of resources among the parties
as well as the embedment of knowledge on a variety of ventures activities. For instance, the
companies affiliated enact the sharing of information on research to ensure the catalysing of
the innovation, especially on mobile industry (NDRC and Treasury, 2008; Zhu, 2004).
Moreover, the ventures aided the country in the sustainability of the competition in the
market (Paul and Martin, 2008). As the venture allow cultural exchange that is integrated in
the invention of the mobile. The assimilation of the culture in the production enabled the
industry to invent products that are of the same standards as compared to other parts of the
globe. For instance, the integration of the applicability of many different colours enabled
invention of coloured material that were attractive in the Indian market that prominently
enabled the managing and thriving of the invention rate in the country.
The scheme of research and innovation infrastructure in China is validated to weak. The
casual effect resulted from the heritage and the tradition of the Chinese that is said to
Confucian one; strictly on the accorded social status to the humanities than the knowledge
and technology. As a result of the open door policy, and the assimilation of the international
Joint Venture, the country resulted to be the manufacturing hub of the world. China still
maintains the first position in the domination of the low value added creation with margins of
les or five percent (Mark and Mark, 2008). a higher percentage of then exports that the
country does are products of foreign owned firms that passed through the country as a benefit
of the joint venture (Andrea, 2010).
The Ministry of industry, alluded that the separation of the research and development and
production was unnecessary and the innovation of the new technology enterprises (Yang,
2005). Recently, under the amendment of the reforms segments of the Chinese innovation
system has developed, especially the mobile industry which has included the following
salient traits:
Research and development are being conjoined into capital resource companies where the
innovation is a vital scheme to be integrated in the firm as to maintain the competitive
advantage in the global market. The government has affiliated with international research
companies to allow the production if the local goods in modern standards. This has enabled
the production of the highly innovative produce hence maintaining the competitive advantage
(Paul and Martin, 2008).
Internal assimilation of the technology is highly encouraged in the industry via Technology
Licensing, Procurement, Equipment Procurement, Foreign Direct Investment and Original
Equipment Manufacturers. All these policies have enabled a lot of innovation at the country.
Some of the policies are to manage the innovation rate that is being experienced by the
country (Yang,2005). Original Equipment Manufacturers, has enabled a lot of mobile
inventions that are benefiting the local communities. This made the communities to attain the
sense of belonging as the foreign companies invest through the local communities thus
retaining the benefits in the community (Yu et al., 2003).
Interactive partnership among the joint Venture (Andrea, 2010). The incessant exchange of
the invention has created a channel of constant communication among the affiliated partners.
The country has an easy access of foreign exchange. This has enabled a robust coexistence
among the partners. Actually, the relationship I more abled when the innovation is made as
this make the companies be affiliated with the success, thus unification among them (Mark
and Mark, 2008).
The role of the system of the joint venture in the innovation process. Johannes, (2013)
exclaims that the state of innovativeness and research and development events are
internationally arranged. Moreover, the multinational firms maximise the innovation aspect
of China to reinforce their competitive advantage (Marc and Pinar, 2001). The International
Joint Venture, has enabled the transmission of the knowledge within the boundaries of the
institution but across the states. This is also highly influenced by the surrounding
environments. Similarly, Andrea, (2010) alluded that invention and internationalization are
progressively entwined: inventive knowledge possessions are inevitable for any success of
the firm. Additionally, on the other hand, the variation of an upgrade and more enhanced
inventions are to created more via the internationalisation a well maximisation of the asset
utilisation, throughout the process of the invention.
The venture has helped a lot in the utilisation of the local resources as well as the
international once (Yu et al., 2003). Although, innovative activities in an international setting
often occur in the multinational firms, the firms rarely are carried out entirely within a single
institution. Networks has helped the mobile industry innovation in China, in the access and
exploitation of innovation capabilities (Mark and Mark, 2008). For instance, in cases when
the company cannot attain particular goal solely, strategic venture is the most appropriate
solution to the as all the firms to attain the aim all together (Marc and Pinar, 2001). The
investment in the mutual learning and the flexibility in the collaborations are affiliated with
the incessant patenting, which has proven to be the best output on the situation (Andrea,
2010).
Members of the venture, the rate of how efficiently and effectively sharing of the information
is highly hinged on the skill and the know how technicalities that the two parties that are
sharing (Yu et al., 2003). Thus, it is easier for sharing of information among the companies
that are rooted in a division of innovation. For instance, the venture that are regulated by the
government assures that the affiliated parties are under the same clause of production (Yu et
al., 2003). Mostly the companies that are involved in the mobile industry is the service
producer. This enhances the companies in the be develop a rigid and a profound elation that
assures the sharing of the information (Yu, 2006). These collaboration enables fast generation
of the ideas. To ensure this the government selects the more experienced companies in the
industry as to run the venture. This results in a guided leadership that will enable fruitful
results.
Advantages and the disadvantages of the joint venture (Yu, Q. Y., 2006; Yu et al., 2003).
4.2. Validation of the model
4.2.1. Advantages
The venture enabled the dismantling of the restrictions encountered by the project approval.
The government has enabled fast approval of the project regardless the ownership status;
individually owned or cooperatively owned Michael et al., 2006.
The government creates a gateway where there is an upfront of investment needed from the
foreign investor likely to be reduced for a joint venture than the locals as shared in the
partner’s terms (Johannes, 2013). This has enabled the government to access the scared
resourced that are located in other parts of the globe (Zhu, 2004). This is certifying the
government has ease access of the scarce technology (NDRC and Treasury, 2008).
Assistance from the affiliated parties in areas such as the obtaining of the government
approvals, recruitment of the labour, sourcing of the raw material, land and production
equipment acquisition and strengthening of the marketing channels. For instance, when the
China based company is affiliated with a firm in Europe and the firm wants to expand the
company to Europe (Richard et al., 2008). The Europe company can oversee on behalf of the
acquiring of the necessities from the licenses to land acquisition on behalf of the firm.
Moreover, this reduces the risk that the firm could have encountered in cases of physical
attaining (Zhu, 2004). This is vivid as the company will not have to face the instability that
comes out as a result of shifting of the company from one position to the other. The joint
venture also assures the market incites in case of an expansion. This as well save the cost that
was to be incurred during the transfers (Tania and Andrew, 2010).
The advantage of acquiring a Chinese partner are grounded on the aid can provide to the
foreign firms that are not conversant with the China market (Li, 2012). Mainly, the support
includes the acquisition of the government approvals, recruitment of cheap labour. Most of
the Chinese local slots for joint ventures do offer the same services, whereby the companies
assist in the selection of the ventures that the foreign companies can capitalise in (Ping and
Kalle, 2000). With the aid of the local knowledge the companies, apply the market incites and
the ability to access the existing markets distributions and the best channels so selection
(NDRC and Treasury, 2008). As result of the validation of the locals are said to be the best in
the analysation of the market resources (Richard et al., 2008).
Consequently, this reduces the upfront capitalisation risk of the foreigner, especially to the
business to business transaction; the transactions are highly based on the multiple person’s
relationship that consume a lot time to develop. However, notably that some foreign
investment has been exaggerated and thus careful affiliation are recommended (Li, 2012).

4.2.2. Disadvantages
In the joint venture the parties also face the various disadvantages, encountered by the foreign
investors where by most of the companies are terminating the joint ventures. The main results
are due to high number of expenditure and longer unfruitful history. The main course for
these are the variation in the culture between the foreigner company and the local company
(Li, 2012). This results to divergence in objective and expectation of the project valuation.
The foreign companies usually seek for a grip in the China’s market and their level of
willingness is higher in building market shares or reinforce the process of making profit
acquisition in the venture (Tania and Andrew, 2010). Whereas, Chinese partners are usually
looking for quick cash for the expansion of the financial grid or pay the debts. Inevitably, this
results to tragic failure if the project as there is divergence in the objectives, thus making the
making management a stiff task to be executed, the frequent results are the miss trusting of
the foreign investors to the local companies (Zhu, 2004).
Arguably, it is deemed decision preferably to have a Chinese partners, so the foreign investor
has to examine for suitable Chinese partners (Michael et al., 2006). The equation standards,
diversification and the dynamism encountered by the Chinese market can either offer an array
of potential opportunities or acquisition of the appropriate partner extremely hard to be found.
Unless, the partners are the predestined match, the balance among the advantage and
disadvantage for the foreigner is usually dependent on the stage of control (Ping and Kalle,
2000).

5. Conclusion
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