State-led technological innovation of domestic firms in Shenzhen, China: Evidence from liquid crystal display (LCD) industry

• Since 2006, there witnessed a paradigm shift of innovation policy in China, which remains understudied.
• There emerges indigenous innovation through strategic coupling of domestic firms in global production networks (GPNs).
• Technological catch-up of domestic focal firms, e.g. CSOT in LCD industry may unnecessarily exclude TNCs.
• The paper sheds light on the changing roles of government in technological innovation of domestic firms in Shenzhen.

Since 2000, particularly in the aftermath of the global financial crisis, there has emerged revisit of the role of the state in technological upgrading of latecomer cities and regions in developing countries, including China. The effectiveness of a technological innovation strategy driven by transnational corporations (TNCs) has been questioned, despite its significant contribution to rapid industrialization via strategic coupling in the global production networks (GPNs). There has been a paradigm shift of innovation policy towards indigenous innovation through state-led explicit coupling of designated domestic firms and lead firms in the GPNs. The practice of this remains understudied, however. By examining the development of the liquid crystal display (LCD) industry, one of the strategic emerging industries (SEIs) in Shenzhen, this paper sheds light on the collective roles of various state authorities ranging from the central to provincial and municipal governments in fostering technological innovation of domestic firms (e.g. CSOT) through explicit coupling with global lead firms (e.g. Samsung). The empirical experience in Shenzhen indicates that indigenous innovation focused on domestic firms may unnecessarily exclude the participation of TNCs. This study urges more research to examine the changing dynamics of technological catch-up of domestic firms in an increasingly globalized and uncertain world economy.