Convergence and Divergence in Multi-level Innovation Patterns : Evidence from the Chinese Manufacturing Industry

Owing to the evolving nature of markets, firms’ ability to enact strategic innovation plays an essential role when adapting to environmental changes and maintaining advantages under intense competition. Incumbent firms will exhibit superior performance in sustainable growth if they can appropriately and promptly integrate novel strategies into their production procedures according to the situations they encounter. Heterogeneity in such an ability between firms leads them to deploy various innovation patterns. We suggest that convergence will emerge in firms’ innovation processes within an industry for two reasons. Primarily, latecomers in innovation refer to their predecessors’ experiences to improve their innovation patterns, increasing the similarities between their practices. Second, the marginal effect of the same strategic innovation on firms’ growth decreases for predecessors while it remains high for latecomers. That is, latecomers are likely to catch up with predecessors from an innovation perspective. In addition, considering that effective strategic deployment derives from firms’ adaptive adjustments to innovation patterns, firms will show different preferences in updating strategies. Hence, we propose that divergence will also arise in innovation processes. Accordingly, we introduced the multi-level structures of markets into our study on innovation patterns, such as firm and industry level factors, to observe their impact on convergence and divergence simultaneously. We focused on the Chinese manufacturing industry and conducted a survey consisting of onsite interviews, field visits, and archive-data analyses. We provide explanations on how firms outperform their rivals in innovation activities