Technological capability and industry catch-up in new digital sectors:evidence from the digital games industry in China and Taiwan

How do latecomer firms from emerging countries compete with incumbents from developed countries in digital industries and what innovative capabilities do they build in order to succeed? The convergence of digital technologies across different disciplines has accelerated technological change and created numerous opportunities, yet existing catch-up literature is not sufficient to explain how latecomer firms from emerging economies with lagging digital technologies have caught up. Drawing upon a qualitative case study of the digital games industry, especially in China and Taiwan, the focus of this research is to explore how the feature of digital product architecture influences the mechanisms of catch-up and capability-building of latecomer firms in emerging economies and to develop a deeper understanding of the relationship with the institutional settings in which they are embedded, and successful catch-up strategies. Meanwhile, changes in industry leadership cannot be neglected because catch-up is not only about catching up, but also the establishment of industrial leadership. This would help to place the concepts of catch-up and capability building in a broader context of competition and industry leadership. The analysis is based on in-depth semi-structured interviews with 62 senior managers (founders, CEO and top-level managers) from firms, and experts (academics, industry experts and government representatives) in China and Taiwan, and triangulates through content analysis of government and company reports and auxiliary data sources.This thesis makes five contributions. First, it develops an integrated analytical model to explain the relationship between technological capability-building, catch-up, and the change in industry leadership, by carefully describing the changes of industry leadership in the world digital games industry and exploring the difference between the behaviours and strategies in latecomer firms in emerging economies and leading incumbent firms in developed countries. Second, this study contributes to our understanding of the industry leadership change in the digital sectors, identifies the common determinants affecting the successive catch-up cycle, and further conceptualises the historical conditions of different countries and the effectiveness of catch-up to provide a more abundant, dynamic picture. Third, this thesis contributes to catch-up literature by revealing how technological regimes in the digital sector affect learning, capability-building and the catch-up processes of latecomer companies in emerging countries. Fourth, this thesis contributes to the learning and catch-up framework by demonstrating the potential of latecomer companies in emerging countries to improve their technical capabilities by their prior industry experience and skills transfer, and the final-end buyers as the knowledge base. Finally, this thesis contributes and extends the literature on the role of institutions in helping latecomer companies to achieve high levels of catch-up performance