An empirical analysis of the coevolution of China's institutional system and rapidly growing PC sector

Since its establishment 20 years ago, China's personal computer (PC) industry has undergone a significant development by leveraging technology spillover through imports of PC parts and accelerated market learning. Despite its extraordinary development, China's PC industry is now facing strong competition from foreign producers, who are responding to nonlinear progress by attempting to establish high functionality development. Functionality development is generally defined as the ability to considerably improve the performance of production processes, goods, and services by means of innovation (Watanabe et al., 2005). Furthermore, the particular attributes of China's social and economic institutions have an impact on the education of the population, the level of urbanization, the national culture's degree of openness, the entrepreneurial culture, etc. These observations suggest the following hypotheses on China's institutional system, which has taken China's PC development to a new level: (i) The multiplier effects of a phased development (technology spillover, market learning, and high functionality development) have contributed to the rapid increase in the development of PC technology and diffusion, thus generating an improvement in the functionality of PC innovation; and (ii) The coevolution of rapid increase in the development of PC technology and China's distinct institutional system has accelerated the improvement of the functionality of PC innovation. (iii) Based on an empirical analysis of the development and diffusion trajectory of China's PC industry focusing on the impact of various distinct institutional characteristics, this chapter attempts to verify these hypotheses.