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A Comparison Study on the Vertical Integration and Horizontal Specialization of Chinese ICT Companies

It is said that the decision of vertical integration or horizontal specialization (the boundary of the firm) affects a firm’s profit and competitive advantage, especially in the ICT industry. This paper focused on top market share Chinese ICT companies in global smartphone industry, Xiaomi and Huawei, to examine how they design their boundary of operation systems in R&D. Patent data analysis is used to investigate Xiaomi’s and Huawei's technology strategies and technical networks, also to compare their systems with each other. According to the results of analysis, we suppose that Xiaomi has rough R&D organization structures and hence has low level of integration, which close to horizontal specialization. On the other hand, Huawei has high weight on internal R&D, and explores technologies related to core technologies. Its R&D structures are more highly integrated than Xiaomi.