Upgrading and Reconstruction of Global Value Chain: Case of Chinese Firm’s Catching Up Trajectory

Abstract

This study aims to evaluate and, more importantly, examine the path of a successful young Chinese high-tech firm in upgrading and reconstructing its position in the global value chain (GVC) of the chip industry. We examine the existing GVC positions of chip firms, the motivations for the firm’s entry into the market, the choice of path to upgrading, and the attempt to restructure the GVCs. The study uses a qualitative approach, mainly interviews and secondary data. The findings suggest that devising and consistently implementing a targeted differentiation strategy, overcoming technological bottlenecks and developing products towards a high-value location, and targeting customers through open innovation and entrepreneurship are key for laggards to improve their position in the GVCs. Building an ecological alliance based on the existing ecosystem is an important means for upgrading a firm and rebuilding the GVC. This is possible for young firms in the emerging segments of Industry 4.0, which are moving into a highly digitised world where there are numerous market opportunities both internally and globally. We argue that the ability to upgrade requires not only internal capabilities, but also the creation of appropriate markets to support the development of capabilities. Our study also provides some managerial implications.