Management Review ›› 2021, Vol. 33 ›› Issue (9): 249-259.

• Organization and Strategic Management • Previous Articles     Next Articles

Strategic Isolation, Capability Loss and Low-end Lock-in

Hu Dali1, Yin Xiaowen1,2, Chen Feilong1   

  1. 1. School of Business Administration, Jiangxi University of Finance and Economic, Nanchang 330013;
    2. School of Economics & Management, East China Jiaotong University, Nanchang 330013
  • Received:2018-08-08 Online:2021-09-28 Published:2021-10-09

Abstract: Sinceits reform and opening up, China has gradually integrated into the global value chain with its own comparative advantage and now has become "the world's manufacturing factory" that is growing rapidly. At the beginning of cooperation with multinational corporations, China's OEMs can take advantage of multinational companies' assistance to achieve production and process upgrading. However, as the OEMs try to enter higher-level value chain, multinational corporations will block them by all means, of which strategic isolation is a commonly used one. This paper uses the theoretical and empirical study to research how multinational corporations' strategic isolation causes OEMs to locked in low end. The research shows strategic isolation has a significant positive correlationship with OEMs' low-end locke-in, OEMs' loss of upgrading capability also has a significant positive correlation with OEMs' low-end lock-in, and the loss of OEMs' technology upgrading capability and market upgrading capability act partially as a mediator between the strategic isolation and the low-end lock-in. Based on that, this paper puts forward corresponding solutions for OEMs to break multinational corporations' strategic isolation, get out of low-end lock-in and climb up n global value chain.

Key words: strategic isolation, loss of capability, low-end lock-in, OEMs, solutions