Introduction

‘In ten years, only three telecom-equipment companies will dominate the world: Siemens, Alcatel, and Huawei.’ This was how Ren Zhengfei, the CEO of Huawei, expressed his ambition for his company in 1994 (Fan, 2010). At that time, Huawei, a small local producer, just developed its first large-scale switching equipment, C&C08, and together with other domestic companies, such as Great Dragon Corporation, ZTE and Datang, it was on its way to start catching up with the multinational corporations (MNCs) in China's telecom-equipment industry. Huawei, ZTE and other domestic companies were fighting hard against the large MNCs in China to gain a share in the domestic market. Two decades later, the landscape of the global telecommunication industry dramatically changed. Ren's prediction about Siemens and Huawei as two of the top three became true, though. Following the lead of Siemens, Ericsson, Huawei, Alcatel-Lucent, Nokia Siemens Networks and ZTE are considered the global telecom companies that ‘dominated the world’ (listed here in decreasing order of their revenue in 2011). Huawei and ZTE, two Chinese telecom-equipment MNCs, have not only emerged into the scene, but also become the crucial players in the global market, thriving in emerging markets such as Africa, Asia and South America as well as in the developed markets of North America and western Europe.

In the early 1980s, China relied almost completely on imports to satisfy its demand for telecom equipment (Zhang, 2000). Within less than three decades, Chinese companies not only achieved remarkable success in the domestic market, but also competed directly with global giants in the mainstream markets mentioned earlier. Leading domestic companies set up networks of sales offices on almost every continent, built manufacturing facilities in key markets and established research and development (R&D) centres in global innovation centres such as Silicon Valley, Stockholm and Bangalore. In terms of innovation capability, some, such as Shanghai Bell, initially relied on technology transfer through joint ventures, whereas others, such as Huawei, ZTE, Great Dragon Technology (GDT) and Datang, developed their own capability from the beginning and made considerable technological catch-up (Fan, 2006a, 2006b; Shen, 1999) due to their knowledge of their own market and production sites, their focus on incremental and architectural innovation rather than radical innovation, and their integration with global knowledge networks (Ernst, 2006).