ABSTRACT
The rise of local innovative firms that facilitated public debates and finally led to a systemic policy transition made it necessary to unfold the socio-economic evolution of the Chinese industry, which helped us reveal the obstacles for developing innovative organization and understand how they were finally constructed. China adopted the trading market for technology (TMFT) policy, and many large state-owned enterprises started to cooperate with multinationals to achieve its goals of substituting imports and enhancing technological capability. Policy practitioners failed to win institutionalized opportunities to gradually build an understanding of objects they produced through reverse engineering and adjusting technological details. The difference between local innovative firms and TMFT practitioners in the organizational system is not just tactical, but also socio-political. TMFT practitioners have failed to achieve this goal as they did not center on innovation, and so have the firms in the planned economy era before TMFT practices as they were not based on competition.
