How Can Latecomers Achieve Catch-Up in Incremental Innovation Sector? Different Accelerated Catch-Ups Between Large and Small-Sized Firms Within Capital Goods Industry

Despite many previous studies on catch-up, the path-following catch-up strategy has remained underexplored because of its questionable sustainability. However, in this study, we suggest that sustained and successful achievement of the path-following catch-up strategy is possible through the strategic manipulation of its components. We thus identify four important components of the path-following catch-up strategy, namely, technology choice, product development procedure, knowledge exploitation, and market development. We then consider these components in conducting in-depth case studies of two major firms, an independent small firm and an affiliate of a conglomerate, in the Korean plastic injection molding machinery industry. The independent small firm (ISF) achieved successful path-following catch-up by choosing technology with modular product architecture and implementing sequential development of subsystems of its products from closed to open modular architecture, which enabled it to overcome the critical challenge facing small firms — that is, financial resource constraints. The ISF accelerated catch-up in particular by developing unique learning mechanisms, namely, “learning by servicing” and “learning by teaching,” which increased its ability to exploit market knowledge. By contrast, the affiliate of a conglomerate (AoC), which chose technology with integral product architecture, accelerated its path-following catch-up by simultaneously developing closed modular subsystems for its product. The AoC’s utilization and leveraging of strategic partners’ complementary assets in R&D and market development also contributed to its faster path-following catch-up. Our findings provide important theoretical grounds for the successful and sustained implementation of path-following catch-up in many developing countries.