Is China Uniform? Intra-Country Differences in the Takeoff of New Products

Abstract

Multi-national corporations (wrongly) introduce new products in China rather late. Such a strategy arises because research treats all of China as one monolithic country, thus, finding that takeoff occurs quite late. However, for large or multi-ethnic countries, intra-country diversity may be quite high, rivaling or exceeding that among inter country differences of some continents (e.g., Europe). This study examines the takeoff of new products among provinces of China based on data of 30 Chinese provinces on 10 categories over 34 years. Rooted in the theory of institutions and product network externalities, this study tests the drivers of new product takeoff using a discrete time hazard model. The major results are as follows: First, time to takeoff varies dramatically across provinces in China. Second, the average time to takeoff varies substantially between products with strong and weak network externalities. Third, time to takeoff is converging across provinces. Fourth, the intra-country differences in time-to-takeoff are explained by economic institutional variables: economic wealth, trade openness, education, media and transportation infrastructure; and product characteristics: network externalities and year of introduction. Fifth, the vast differences in takeoff of new products across provinces suggest that a waterfall strategy within China might be more profitable.