Huawei’s Leapfrogging to Overtake Ericsson

Abstract

Chapter 8 explores how Huawei was able to emerge as the leader in the telecommunications system sector, overtaking the incumbent Swedish giant Ericsson. It answers this question by focusing on whether a latecomer firm trying to catch up uses technologies similar to or different from those of the forerunners. The study investigated patents by Huawei and Ericsson and found that Huawei relied on Ericsson as a knowledge source in its early days but subsequently reduced this reliance and increased its self-citation ratio to become more independent. The results of mutual citations, common citations, and self-citations provided strong evidence that Huawei caught up with or overtook Ericsson by taking a different technological trajectory. Huawei developed its technologies by relying on more recent and scientific knowledge; in terms of citations to scientific articles and citation lags, Huawei extensively explored basic research and up-to-date technologies to accomplish its technological catch-up. This study suggests that leapfrogging by exploring a new technological path is a possible and viable catch-up strategy for a latecomer. Moreover, Huawei’s case re-confirms the hypothesis that catch-up in technological capabilities tends to precede that in market share. Huawei overtook Ericsson in terms of quantity and quality of patents before annual sales. In summary, the results suggest that Huawei’s catch-up with Ericsson in the telecommunications equipment market is owing not only to its cost advantage, the large domestic market, or the Chinese government’s support but also more importantly to its technological leapfrogging based on its technological strength and independence.