Complex Products and Systems: History
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Zhongji Yang

Successful catch-up is an important channel to achieve sustainable development for emerging economies; however, it is a great challenge to catch up in complex products and systems (CoPS). CoPS are defined as high-cost, engineering-intensive products, systems, and networks, and they play a critical role in modern industrial systems.

  • complex products and systems
  • catch-up
  • innovation ecosystem
  • high-speed railway
  • China
  • emerging economies

1. Introduction

CoPS are defined as high-cost, engineering-intensive products, systems, and networks [1], and they play a critical role in modern industrial systems [2]. Studies focusing on CoPS catch-up hold controversial opinions [3]. On the one hand, the characteristics of CoPS make it a great challenge for emerging economies to master key technologies and develop systems integration capabilities [4]; much of CoPS literature is skeptical about catch-up in the CoPS industries of emerging economies [5][6]. On the other hand, an increasing number of successful catch-up cases prove that it is possible to realize CoPS catch-up in emerging economies, such as China’s HSR, Brazil’s aircraft, and Iran’s land gas turbine industries [4][7][8]. Thus, this entry focuses on the successful catch-up case in CoPS to eliminate the debate.
Extant literature focuses on an evolutionary perspective and pays attention to the key role of the catch-up context and environment [9][10]. The notion of national innovation systems is used to explain Japan’s catch-up process from the 1960s to the 1980s [11][12]. Subsequently, the sectoral innovation system is proposed to explore the determinants for industrial leadership changes [13]. However, since the 1990s, the rise of Silicon Valley has attracted increasing attention to the innovation ecosystem and sustainable development [14]. Innovation ecosystem has become an attractive concept used by governments and scholars to explain economic competition and catch-up, especially in strategic management literature [15][16][17]. Few studies focus on the CoPS innovation ecosystem [18], and extant literature on CoPS catch-up follows the sectoral system of innovation. There are three main differences between the innovation ecosystem and the innovation system at the industrial level. First, the sectoral innovation system focuses on various knowledge bases, networks, and institutions at the industrial level [13], while the innovation ecosystem emphasizes the role of market. Second, the innovation ecosystem at industrial level focuses on a common value proposition to materialize [19], while the sectoral innovation system focuses on upstream and downstream of production. Third, the innovation ecosystem pays much attention to diversity, balance, and symbiosis of different actors, while the sectoral innovation system emphasizes on competition among actors [20]. The highly complex characteristics of CoPS mean that no innovation succeeds in isolation. Heterogeneous actors in the CoPS cooperate with each other much more closely and they are involved in a dynamic and complicated innovation environment [21]. However, how technology innovation and value creation coordinate to promote catch-up in CoPS is ignored. This entry addresses this gap; researchers examine CoPS catch-up under the innovation ecosystem perspective using a longitudinal case of China’s HSR and investigate the process mechanism of CoPS catch-up to elaborate how different subsystems interact to achieve successful catch-up in the CoPS of emerging economies.

2. CoPS Catch-Up in Emerging Economies

2.1. Characteristic of CoPS

Extant literature distinguishes distinct characteristics between CoPS industries and mass production industries [1][3].
First, many scholars claim that CoPS are technology intensive, project-based and user embedded, representing national competitiveness [21]. Hobday [1] noted that CoPS activities are more skill and craft intensive. Additionally, some scholars have explored the level of competencies and competitiveness of CoPS [2]. Some evidence shows that developed countries rely on CoPS industries to ensure continuous economic advantage in a global economic downturn [6].
Second, CoPS industries have strong industrial upstream and downstream relationships. Hobday [1] provides more than eighty examples of CoPS, including high-speed trains, airplanes, nuclear power plants, telecommunications exchanges, etc. Firms in CoPS industries should develop world-class products and assets and build open relationships with partners at home and abroad [22]. For example, Boeing, one of the largest aircraft manufacturers, has approximately 3000 suppliers and complementors all over the world, driving the development of steel, rubber, equipment manufacturing, and other industries [23].
Third, value in CoPS industries follows a pyramidal hierarchy process. CoPS markets are often oligopolistic and bureaucratic [1]. The government plays an important role in value creation [4]. Specifically, a CoPS is coordinated by a system integrator. A production unit or a temporary project-based organization involving many firms, and it comprises many customized components [24]. Compared with mass production industries, value is delivered from system integrators to others, and the process goes beyond the production chain and extends to co-production and value-in-use [25].

2.2. CoPS Catch-Up Models in Emerging Economies

Latecomers from emerging economies are often seen as in lack of resources and capabilities [26]. To understand how the catch-up process works, there are four streams of literature on CoPS catch-up models from different perspectives.
The first stream involves the learning process model by Hobday [27], which concludes that learning occurs not only at the technology level but also at the market level. Hobday [27] also argued that some latecomers in electronics in East Asia started with simple activities such as assembly and then gradually progressed to more technologically complex tasks. Meanwhile, some latecomers accumulate various capabilities, such as systems integration, design, and production engineering through learning by doing [16][28].
The second stream involves Kim’s [29] three-stage model, called acquisition, assimilation, improvement, which suits both CoPS industries and mass production industries [3]. Specifically, latecomers acquire advanced technologies through international technology transfer. Then, they assimilate advanced technology through indigenous R&D, and finally, latecomers improve their existing knowledge to create a new or advanced product. However, latecomers in emerging economies have the risk of falling into a vicious cycle of “import-lag behind-import again” [30].
The third stream involves [31] three types of catch-up strategies, including path-following, path-skipping, and path-creating. Shan and Jolly [32] found that China’s telecommunication firms adopted a path-following strategy in the early stage and moved to path-skipping strategy in the later stage. Lim et al. [33] proposed that the shipbuilding industry in Japan and Korea used a path-creating strategy to be a global industry leader. Nevertheless, Majidpour [8] displayed the view that path-following is the dominant model of technology catch-up in the CoPS industries of emerging economies.
In addition, the secondary innovation model by Wu et al. [30] focuses on latecomers in the Chinese context and emphasizes the combination of acquired technologies and existing technology systems. This model is used to explain technology catch-up in emerging industries and firms in China [34][35].
All the above studies focus on the catch-up process of industries or firms in emerging economies and have developed different models from various perspectives. However, on the one hand, these models do not depict the details of the catch-up process, such as the starting point and specific activities; thus, researchers still know little about the process mechanism in the catch-up process. On the other hand, catch-up models are used to reveal the determinants of successful catch-up in a specific context, and there is no universal model to explain various catch-up phenomena, especially in the CoPS context. Therefore, diverse catch-up models are urgently needed [36].

3. The CoPS Innovation Ecosystem and Catch-Up

3.1. Structure and Habitat of CoPS Innovation Ecosystems

Innovation ecosystems, as the main innovation paradigm in global highly intensive competitive environments, has attracted substantial interest in academia during the past two decades [17][37]. Adner [16] defined an ecosystem as encompassing “the alignment structure of the multilateral set of partners that need to interact in order for a focal value proposition to materialize”. Granstrand et al. [38] concluded that an innovation ecosystem corresponds to “the evolving set of actors, activities, and artefacts, and the institutions and relations”.
Based on the structure approach, innovation ecosystems can be divided into several subsystems [39][40]. For instance, Xu et al. [41] proposed three subsystems of innovation ecosystems: science, technology, and market; each subsystem has an integrated network to form a hierarchical structure. Wu et al. [42] constructed a structure model of innovation ecosystem at the industrial level, focusing on the technology innovation layer and the value creation layer, but the habitat layer was ignored. Chen and Liu [18] set up an innovation ecosystem framework including technology dimension, value dimension and capability dimension.
A habitat is the environment in which species live. Species not only are affected by their habitats but also modify their habitats [43]. However, scholars in innovation ecosystems focus on actors, activities, artefacts, relationships, and institutions [17][38]. Oh et al. [44] criticized the fact that scholars pay little attention to the “eco”. In fact, an increasing number of scholars are urging the academia to look beyond the technology elements in innovation ecosystems to see the habitat in the co-evolution of technological and socio-technical regimes [45][46].

3.2. Technology Innovation Subsystem in the CoPS Innovation Ecosystem

Technology plays a determining role in catch-up. Because of technological interdependence, the competitive advantage of incumbents’ innovation ecosystems depends on their components from suppliers and complements from complementors. In addition, actors and relationships form the generic scheme of the technology innovation subsystem [47][48].
Compared with mass production industries, technology innovation subsystems in CoPS industries present distinctive characteristics.
In the product dimension, CoPS comprise hundreds or even thousands of customized components. Key components and complementary components need distinct technology knowledge. Thus, the number of components, the degree of customization, the range of the knowledge base, and the capabilities of suppliers can influence the complexity of CoPS [1][49]. Within the product architecture of CoPS, alternative designs for particular components may exhibit disruptive performance at the system level [24]. The complex products characteristics of CoPS make catch-up difficult for latecomers.
In the innovation process dimension, as a result of product properties, innovation activities, and diffusion may overlap and collapse in CoPS [1]. In contrast to the life cycle of mass products [50], the life cycle of CoPS remain in the fluid stage for a long time [3]. The difficulty and complexity of technology innovation in CoPS significantly increase from one generation to another [51].
Moreover, complementary assets are an important enabling factors in CoPS catch-up [4], such as complementary technology, manufacturing and services [22]. System integrators in CoPS industries need to coordinate large numbers of suppliers and complementors; in cases such as the A380 super-jumbo passenger aircraft, the breakthrough of core technology alone is not equivalent to the success of the whole industry [47]. Therefore, the level of complementary assets perform a fundamental role in the catch-up of CoPS industries [4].

3.3. Value Creation Subsystem in the CoPS Innovation Ecosystem

The value creation subsystem consists of entities including supplies, complementors, focal firms, and other partners [39]. Value proposition, value transfer, and value distribution are basic value creation activities [52]. The market structure of CoPS industries determines different characteristics of value creation compared with mass production industries.
On the one hand, the market regime in CoPS industries is oligopolistic and it is often bureaucratically administered without a free market transaction environment [1][8]. User demand is blurred in the early stage of CoPS industries [5]; thus, project-based organizations, especially those focal firms, often propose vague value propositions in line with their own interests [53]. On the other hand, the government is the key source of value propositions in CoPS industries due to its international power of speech, military, national security, and other unique status [54]. Users, generally referring to public sectors, jointly design, maintain, and upgrade CoPS with partners [55]. Overall, focal firms, governments, users, suppliers, and complementors create value together and distribute value layer by layer.

3.4. Habitat in the CoPS Innovation Ecosystem

Similar to the natural ecosystem, the habitat of entities in the innovation ecosystem depends on competition and cooperation relationships [56]. The bureaucratic market of CoPS industries indicates that the government plays a critical role in shaping the habitat, especially in emerging economies [18][28]. Therefore, the habitat in CoPS industries is different from that in mass production industries.
In terms of a competitive environment, protective industrial policies are the main choice for governments to develop CoPS industries [57][58]. For example, the Korean government planned promotion policies for the shipbuilding industry in 1976 and promulgated policies such as financial incentives, complementary investments, and trade incentives to protect the domestic market [33]. Similarly, the governments of India and China used abundant protective policies to develop the wind turbine industry [59].
In terms of the cooperative environment, the successful catch-up of Iran’s gas turbine industry, Korea’s e-government and China’s medical device industry show that the university–industry linkage (UIL), such as joint or contract-based research, is a key factor for catch-up [3][8].

3.5. Elements of CoPS Innovation Ecosystem and Catch-Up

From the above literature, CoPS innovation ecosystems consist of three elements: technology innovation subsystem, value creation ecosystem, and habitat. Each element plays a unique role in CoPS catch-up. First, the lagging of technology level is the direct cause of the latecomer to catch up, so that it is critical to develop technology innovation subsystem to speed up catch-up. Second, leaders always create much more value than latecomers in CoPS, but complex value creation activities in CoPS is ignored by extant literature; this entry considers value creation subsystem as one of important elements for successful catch-up. Finally, habitat is a fundamental environmental factor in CoPS catch-up. Indeed, competition and cooperation coexist in the innovation ecosystem, a vibrant innovation ecosystem is often constructed intentionally by all participants. Regardless of what kind of ecosystem is constructed, the shared value proposition is consistent, and the ultimate goal is to achieve sustainable development similar to a natural ecosystem [60][61] so that the evolution of innovation ecosystems always accompanies successful catch-up.

This entry is adapted from the peer-reviewed paper 10.3390/su14137930

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