Knowledge absorption of optical technology companies in Shanghai, Pudong: Successes, barriers and structural impediments

Knowledge absorption theories argue that technologically less advanced companies (latecomer firms) can substantially upgrade their knowledge base through active knowledge absorption. These theories view knowledge absorption as a stepwise process which includes a linkage phase, a leverage phase and a learning phase (LLL concept). Case studies in Taiwan and Korea have shown that latecomer firms can indeed follow this approach and catch-up technologically with advanced firms. This paper aims to discuss the relevance of the LLL concept in China using the example of Optical Technology (OT). It reveals that the concept is not universally applicable. In the case of China, the ownership of companies determines successes and failures of strategies for increasing knowledge absorption. Private firms face substantial difficulties in establishing the necessary linkages; the upgrading of foreign-invested enterprises (FIEs) is controlled by their parent companies. This result has implications for theoretical concepts of learning and innovation in China, as well as for policy.