1. HUAWEI vs. ERICSSON CATCHING-UP WITH ‘SIMILAR OR DIFFERENT’ TECHNOLOGIES?: KEUN LEE ( WITH C. OH, S. JOO)

2. Huawei = China’s No 1 IT Company established in 1987 by Ren Zhengfei 2

3. 3 Market Catch-up: Annual Sales of Ericsson and Huawei

4. 4 Research on Huawei’s Success –Chinese Company’s IPR Strategy: How Huawei Technologies Succeeded in Dominating Overseas Market by (Nakai & Tanaka, 2010) –Huawei Technologies competing in an international market (Drs.vanden Hoogen, 2010) –How can Chinese companies go global successfully (Arthur Yeung,2005-CEIBS) –Internationalization of Chinese firms: A case study of Huawei Technologies Ltd.(Wei huang,2006-Nottingham Univ) –Management of R&D within a Dynamic Standardization Environment (Keith Dickson, Fang Fang,2008) This study: detailed analysis of catch-up strategy using patent data cf) Joo & Lee (2009): Samsung vs. Sony Previous Studies

5. Our focus: catching up by Similar or different technologies: imitation or innovation ‘Similar’ technologies” = latecomer attempts to imitate the incumbents, ‘different’ technologies: latecomer to create new technologies and take a different technological path or trajectory. Literature: 1)The literature, such as Lall (2000), Kim (1980), Westphal, Kim, and Dahlman (1985), and Hobday (1995): -Latecomers tried to catch up by assimilating more-or-less obsolete technology from the advanced economies 2) Lee and Lim (2001) and Lee (2013), is that the latecomer does not simply follow the advanced countries’ path of technological development; rather they sometimes skip certain stages or even create their own path. => no studies have quantitatively analyzed whether a latecomer firm catch up with forerunners using on the same or different technologies, no method for such analysis, except Joo and Lee (2009) 5

6. Using EPO patent Data 6 Patents of Huawei and Ericsson(European patents granted by from 2000 to 2010) and related citations. Specifically, we analyzed the patents filed and registered at the European Patent Office (EPO) from the PATSTAT database. to investigate when and how Huawei caught up with Ericsson in terms of quantity and quality of patents. Patents filed by Huawei and Ericsson to various national authorities were collected from PATSTAT Database, which is constructed by European Patent Office. The patents were recognized according to their application year, considering time of invention. We analyzed the number of registered patents to analyze its technological catch-up in quantity terms, and conducted a patent citation analysis to analyze the catch-up in quality terms.

7. The technological proximity between the two firms suggested by Jaffe (1986) The technological proximity between two firms, i & j, is defined as: Technological proximity is measured as a value between 0 and 1. The higher the value is, the more identical the two firms are in techn ological specialization, and vice versa. Making Sense of the Comparison (Technological Proximity) 7

8. Technological proximity of Huawei and Ericsson at IPC subclass level stands at 0.912. (cf.) The technological proximity between Samsung and Sony, two major competitors in the global electronics industry were 0.98 (Joo & Lee, 2010). On this ground, it can be said that an analysis of Huawei and Ericsson at the technological level is very meaningful. Making Sense of the Comparison (Technological Proximity) 8

9. 9 The catch-up phenomenon 1: from technology to sales catch-up ● Huawei’s Market Catch-up with Ericsson - Sales : From 2013 ● Huawei’s Technological Catch-up with Ericsson - patent Quantity : From 2008 - patent Quality : From early 2000  catch-up in technologies preceded the market catchup in sales;  Technologies = basis for market catch up  cf) same pattern : Samsung vs. Sony (Joo & Lee 2009)

10. Catch-Up in Terms of the Quantity of Patent Number of Patent Filings by Country and Year Company CTR Y 20002001200220032004200520062007200820092010Total Huawei EP3283762852195636476279032364 EricssonEP8717666064315215236186583781625390 10

11. 11 Research Question 1: Catching up by Similar or different technologies? Answer with 4 criteria 1)Patent quality 2)Independence: self –citations 3)Mutual dependence: mutual citations 4)Common citation ratio = indirect dependence By comparing a pair including the case of overtaking (completed catch-up) only, not case of some rise of the latecomers; => very few cases, thus not sample cases but universe in each sector eg) Samsung vs Sony; Hyundai Motors vs. Mitsubish, Hyundai Shipbuilding vs. Mitusbish Shipbuilding

12. 12 1 Quality of Patents: Average number of citations received: All patents in PATSTATEP patents only

13. 13 cf) Samsung vs. Sony: Quality of patents Sony Samsung

14. 14 2 Independence: Self Citation Ratio

15. Self-Citation Ratio Cf) Samsung vs. Sony: self-citations 15

16. 16 3. Mutual reliance: Share of citations directed to the counterpart firm’s patents

17. Cf) Samsung vs SONY (3) Technological Dependence 17

18. 18 4. Technological Overlap between Huawei and Ericsson: common citation ratio = indirect dependence each other Importance of those common (78) patents in Ericsson ‘s patents + importance of those patents in Huawei ‘s patenting => (91/(4484+91)) + (87/(3360+87)) = 0.020 + 0.025 = 0.045

19. 19 1) Knowledge sourcing : There are commonly cited patents (C) by both Ericsson and Huaweil Importance of those patents in Ericsson ‘s patents + importance of those patents in Huawei ‘s patenting Citations made to C by Ericsson (e) Citations made to C by Huawei (h) =( e/ total citation by Ericsson) + (h/total citation by Huawei) = 0.045 2) Knowledge supplying side: There are the patents commonly cited by both Ericsson & Huawei; => then do the similar calculation as the above; 0.026 3) Two-side sum = 0.071 Very low => a) Huawei and Ericsson do not share the same knowledge sources; b) their knowledge, supplied to or applied by different technologies cf) High in Samsung vs Sony = 0.36 + 0.32 = 0.68

20. 20 Research Question 2: whether Huawei relies more on recent (or old) technologies than the incumbents = latter’s citation lags, One may reason that the latecomer would try to rely less on old technologies protected by patents of the incumbents.  citation pattern will be more toward recent patents. = average cycle time of their patent portfolio would be shorter Cf) Park and Lee (2006) or Lee (2013), : latecomers tend to specialize in short- cycle technology based sectors. While that literature is concerned with across-sector specialization, we explore a twisted question of whether a latecomer firm’s patent portfolio would show the shorter average cycle time than that of incumbents in the same sector

21. 21

22. Backward Citation LagForward Citation Lag Cf) Samsung vs. Sony: citation lags 22

23. Research Q3: Reliance on Science (to avoid patent dispute): Citation to Non-Patent Literature 23

24. 24 Summary & Conclusion 1 Interesting sequence : Technological catch-up preceded market catch-up => Tech. Capability is the fundamentals in Catch-up 2000200820102012 Quantitative Technological Catch-up Qualitative Technological Catch-up Catch-up In Sales

25. Technological Capability is the fundamentals of Catch-up cf) Same Sequence in Samsung vs Sony 19902002 Catch-up In Market Value 20042000 Quality of patents Quantity: catch-up Catch-up In Sales 25

26. 26 Summary & Conclusion 2 1)In the case of successfully completed catch-up, the latecomer eventually created its own unique path, different from the incumbents -- transition from imitation to innovation (catch-up paradox: you will never ‘catch up’ if you just keep ‘catching-up ’; 2) relied on more recent technologies than the incumbent (maybe only true in short cycle tech. based sectors) 3) It also relied more on science than patented technologies: (less constrained by IPRs by incumbents) Cf) Similar story in Samsung, with slight difference (eg; indirect dependence)