Chinese SME development and industrial upgrading

Abstract

Drawing from industrial upgrading theories, this study aims to explore the issues of industrial upgrading and small and medium-sized enterprises (SMEs) development in an emerging market – China. A contextual stepwise approach is undertaken by applying netnography and interviews to investigate manufacturing SMEs' perceptions on upgrading. The study outlines three economic actors – government, industry and manufacturer; two upgrading factors – internal and external; a vicious circle that consists of thin profit, quality and imitation issues; and a benign circle that incorporates a list of upgrading capabilities – research and development (R&D), creativity, design and branding – in the context of upgrading to the value-added supply chain. By integrating the findings with relevant literature, the authors propose a framework to best illustrate manufacturing SME upgrading. The findings reveal that Chinese manufacturing SMEs acquire upgrading capabilities through organizational learning during the upgrading process, which is affected by both external and internal factors in the constraints imposed by the interplay of relevant actors. Through the innovative methodological approach, this study affords great insights into industrial upgrading from the perspective of manufacturing SMEs in an emerging economy – China.