Model

Abstract

In this chapter, we develop a model of the diversification mechanism presented in the previous chapter to generalize the experience in China’s mobile phone handset industry.¹ We have in detail analyzed the make-or-buy decisions of Chinese handset manufacturers through a decade. The case study can help us understand the complicated relationship among the three factors: the technology gap, external technology, and internal knowledge. But it is still difficult to expect that an exact optimal balance among the three factors would be established. Therefore, we develop the diversification mechanism model and identify entry conditions of indigenous firms facing a technology gap.