Lead
The road of technology evolution of Cixing shows that late-developing enterprises need to choose an appropriate technology learning mechanism according to the resource dependence of both parties after reverse cross-border mergers and acquisitions in order to achieve technological self-reliance and self-reliance. After the cross-border acquisition of Stange in Switzerland, Cixing's technical learning is divided into two stages: catch-up and over-catch-up: in the catch-up stage, Cixing relies on Matteranger for new product development, accelerates the digestion and absorption of full-forming technology through the technology deconstruction mechanism, accumulates the necessary knowledge of new technologies, and has product engineering capabilities; 。
Text / Peng Xinmin, Han Wenze, Zhang Qirui
Since 1589, the English inventor William Lee (William Lee) has been in the works since 1589. Since the invention of the first hand-knitted machine, knitting machinery has undergone hundreds of years of development, and a number of new technologies and star enterprises have emerged, which have promoted great changes in sweater manufacturing methods, processes and efficiency. On the whole, the leading technology of the knitted flat knitting machine industry has experienced a change from the early hand-cranked flat knitting machine, to the ordinary computerized flat knitting machine in the 80s of the 20th century, and then to the design change of the full-molded flat knitting machine in the 21st century, and the main market has also experienced a gradient shift from Europe and the United States to Japan and then to China. At present, with the transfer of the world's sweater textile industry to China, China's knitting machinery enterprises represented by Ningbo Cixing have gradually entered the center of the world stage.
Ningbo Cixing Co., Ltd. (hereinafter referred to as "Cixing") was founded in 1988, focusing on the research and development, production and sales of flat knitting machines for a long time, and was successfully listed in 2012, and won the title of "Manufacturing Single Champion Demonstration Enterprise" in 2017. In 2022, the technical performance of the KS series first-line forming flat knitting machine independently developed by Cixing has reached the world's leading level, the market share ranks in the forefront of the industry, and it has won the honor of the first (set) product in China.
As a latecomer in the field of flat knitting machines, how did Cixing become an international leading enterprise from a small local factory in Ningbo? Reverse cross-border M&A is an international business behavior in which latecomers acquire strategic resources through mergers and acquisitions of enterprises in developed countries, which can help latecomers to catch up with and surpass leading enterprises. After the global financial crisis in 2008, flat knitting machine enterprises in European countries were difficult to maintain due to high operating costs, which provided a window of opportunity for Chinese local enterprises to learn the technology of leading enterprises through reverse cross-border mergers and acquisitions. In 2010, Cixing, which has reached the world's largest market size in the general computerized flat knitting machine, acquired the Swiss Steiger, a veteran European flat knitting machine manufacturer, and began to enter the latest field of full-forming flat knitting machines. Through 12 years of mergers and acquisitions and technical learning, Cixing has achieved self-reliance and self-improvement in full-forming technology, and has launched a number of KS series first-line forming flat knitting machines with independent intellectual property rights.
Cixing's technical learning after cross-border mergers and acquisitions is divided into two stages: the catch-up stage (2010~2017) and the surpassing catch-up stage (2018~2022). In the catch-up stage, Cixing relied on the technical knowledge of Stange for new product development, accelerated the digestion and absorption of the full molding technology through technical deconstruction, launched the TAURUS full forming flat knitting machine, and accumulated the necessary knowledge of the full forming technology;
Catch-up stage (2010~2017): technical deconstruction
In 2010, the full forming flat knitting machine gradually became a new technical development direction of domestic flat knitting machine due to its advantages of integrated garment, saving sewing process, high efficiency and energy saving, and fine fabric quality. At this time, although the production and sales of ordinary computerized flat knitting machines of Cixing have ranked first in the world by virtue of its cost advantage, due to the lack of accumulation of total molding technology, the sustainable development of the future is facing great challenges. In order to achieve strategic transformation, Cixing acquired the world's third largest flat knitting machine manufacturer at that time, which was famous but difficult to operate, and began to enter the field of full molding. At this stage, Cixing's technical learning relies on the absorption of technical knowledge of Shitange, and mainly adopts the means of technical deconstruction to achieve it.
Cixing's dependence on the technical knowledge of the Matter. Resource dependence is the dependence of enterprises on those organizations that own or control key resources due to lack of resources, and knowledge is an important strategic resource for enterprises to gain competitive advantage in a complex and volatile global environment. The resource dependence of latecomers and enterprises in developed countries is mainly reflected in the asymmetry of key resources such as technological knowledge and market knowledge. In the early stage of reverse cross-border M&A, due to the lack of strategic resources such as full-molding technical knowledge and high-end brands, Cixing faced resource asymmetry after the merger, resulting in dependence on the technical knowledge of Shitange. With more than 50 years of experience in the development and design of flat knitting machines, and the world's leading intarsia and plate-making technology, Matteranger began to pay attention to the full molding technology as early as the 90s of the 20th century, and enjoys a high brand reputation in the market. In 2010, the leading design of the flat knitting machine was the four-needle plate structure plus the composite needle, and the patent of the composite needle at that time was mainly held by two companies, Matteranger and Japan's Shima Seiki, so Cixing continued to use the four-needle version of the composite needle after the merger and acquisition of Mattertange. In view of the accumulation of technology in the field of full-length flat knitting machines, Cixing entrusted Matteranger to be fully responsible for the research and development of full-form flat knitting machines, and cooperated with them to carry out trial production, production, assembly and debugging, and gradually learned the design concepts and advanced technologies of Matterang in the field of full-form flat knitting machines.
Technological deconstruction. Technological learning is an important mechanism for latecomers to adapt to new technological changes, and based on the perspective of absorptive capacity, the technological learning of latecomers can be divided into two mechanisms: technological deconstruction and technological reconstruction. Technology deconstruction decomposes advanced technology into several parts or modules and then digests and absorbs it, while technology restructuring reorganizes knowledge from different sources into commercial products through localized innovation and adaptation, so as to seize market opportunities.
Flat knitting machine belongs to assembly products, which involves component design knowledge, architecture design knowledge and product manufacturing process knowledge. Component knowledge is knowledge about each core design concept and how they are implemented in a particular component, architecture knowledge is the knowledge required to integrate and connect components together to form a coherent whole, and process knowledge is the knowledge of processing raw materials or semi-finished products into products at a lower price. Cixing realized that there was a large technological gap between the two parties, so in the early stage after the merger, it first absorbed the component technology that was relatively difficult and suitable for the development stage of Cixing. For example, Cixing absorbed and improved the intarsia technology of Stange, developed the Zhipao yarn nozzle, and later updated the needle turner, yarn reservoir, pulling device and other components. These improvements not only improved the performance of existing products, but also helped Cixing accumulate component knowledge of total molding technology. Through a series of technical deconstruction measures, Cixing has split the total molding technology into different modules, digesting and absorbing from shallow to deep, from simple to complex, making up for the lack of technology in the new field.
In 2017, with the cooperation of Cixing, STANGER led the development of the first four-needle plate full forming flat knitting machine TAURUS. Due to the compound needle scheme adopted by TAURUS, the cost of each customized special needle type is as high as hundreds of yuan, and each machine needs hundreds of compound needles, which makes the cost of the machine remain high, and the price is more than one million yuan, far exceeding the acceptance range of ordinary customers in China. At the same time, under the four-needle plate design, the replacement of compound needles is extremely inconvenient, and the operation efficiency will be greatly reduced in actual use. Due to the disadvantages of cost and performance, TAURUS has no competitive advantage over Shimasei's flat knitting machines, and although it has been able to realize the basic functions of full molding in engineering, its commercialization has been seriously hindered.
Beyond the catch-up stage (2018~2022): technology reconstruction
After TAURUS had been engineered but failed to commercialize, the resource dependence between Cixing and Shitange was reversed. The further commercialization of the flat knitting machine focuses more on the dependence on the knowledge points of the Cixing market, and the way of technical learning has also evolved from technological deconstruction to technological reconstruction.
Stange's reverse dependence on Cixing's market knowledge. The failure of TAURUS's commercialization is mainly due to the fact that the company is solely responsible for R&D, far away from the Chinese market, does not understand customer needs, and only focuses on the advancement of technology. However, product innovation requires companies to have both technical knowledge and market knowledge, and only by connecting the two knowledge can new products be created. Market knowledge refers to the knowledge of customer needs, preferences and purchasing behaviors, as well as the various marketing and channel knowledge that enterprises have mastered. Compared with the company, Cixing has been deeply involved in the domestic market for a long time, has a well-trained technical service personnel, and has accumulated a lot of customer knowledge and rich market knowledge. In 2018, Cixing adjusted the functions of Matterange, no longer putting him in charge of the research and development of the whole machine, but specializing in the development of its strength, plate-making software, and Cixing itself led the research and development of a new generation of full-forming flat knitting machines.
Technology refactoring. In view of the lessons learned from the failure of TAURUS due to high costs, Cixing decided to reconstruct the architectural design of the flat knitting machine. In view of the problems of high cost, complex operation and difficult maintenance of the four-needle plate and compound needle architecture design adopted by Taurus, Cixing first subverted the architectural design. Through the reverse engineering of the dismantling machine and the repeated discussion of the product structure, Cixing proposed the architectural design of two needle plates and ordinary needles. In order to develop a new structure, on the one hand, Cixing continued to discuss the feasibility of the plan with Shitange, and actively carried out personnel visits, video exchanges and information sharing, on the other hand, Cixing continued to strengthen talent training and technology investment, and established a full-molding research institute in 2018, focusing on cultivating internal technical backbones, and the strength of the company's R&D team has been significantly improved. In the process of developing new products, Cixing creatively applied the rake in the underwear machine to the two-needle board model, invented the special and key pulling component of the needle rake, and finally successfully used the minimum needle distance arrangement and the way of needle rake pulling, and skillfully replaced the composite needle with an ordinary needle of a few yuan per piece on the two-needle board, and the cost of the whole machine was greatly reduced. At the end of 2018, the KS3-72 full-forming flat knitting machine using ordinary needles and two needle plates was launched, and the price was only one-third of that of similar products in international counterparts while achieving the same 12-needle knitting effect. The KS3-72 series flat knitting machine, which has a very high cost performance, has been warmly welcomed by the market as soon as it was launched.
After the success of KS3-72 innovation, Cixing continued to improve the product performance based on customer feedback. For example, the plate-making software originally carried by Matteranger did not conform to the habits of Chinese masters, so Cixing cooperated with Matteranger to develop Model plate-making software to meet the operating habits of local users, and then the plate-making software was continuously upgraded, from Model 1.1 in 2019 to Model plus 1.0 in 2020, and updated to Model plus in 2021 2.0; At the same time, in 2019, Cixing also established a first-line molding intelligent production workshop to mass-produce full-forming flat knitting machines, and further reduce costs through large-scale; in addition, in order to distinguish from the full-forming products of other enterprises, Cixing named the KS3 series flat knitting machines as "first-line forming flat knitting machines", which clearly demonstrated the uniqueness of the products and improved the market recognition.
In addition, for a long time, due to its high cost and technical difficulty, only a few companies in the world have production capacity, and specialize in the high-end market, and many small and medium-sized enterprises are subject to the high price of full forming flat knitting machine and buy less. In 2020, Cixing repositioned the flat knitting machine, no longer as a high-end product in the flat knitting machine market, but positioned as a general equipment for the next generation of knitting machinery, aiming to completely replace ordinary flat knitting machines at an acceptable price for the majority of knitting manufacturers, and promote the overall upgrading of the mainland knitting industry. To this end, Cixing began to serialize the KS3-72 full forming flat knitting machine. On the basis of the first 10.2 specification flat knitting machine, Cixing has successively developed 4.2, 5.2 and 6.2 coarse needle models, which have achieved the weaving effect of 8 needles and 10 needles, and developed 4-needle plate models such as 13.2 ordinary needles upwards to meet the knitting effects of 16 needles and 18 needles. In addition, Cixing also plans the development of 20-needle, 24-needle, 26-needle and other products to maximize high-density knitting. As a result, Cixing has successfully realized the commercialization of a number of KS series first-line forming flat knitting machines with independent intellectual property rights, with a cumulative sales of more than 2,000 units in 2019~2021, which is much higher than the market share of more than 1,000 full-process flat knitting machines accumulated by SHIMA SEIKI of Japan over the years, and has achieved catch-up and surpassing leading enterprises in technology and market. Since then, Cixing has established a strong competitiveness in the full-molded flat knitting machine market, and has begun to lead the development of the industry with its unique technical advantages and strong scale effect.
Resource dependence asymmetry and technology learning mechanism selection
The process of Cixing catching up with and surpassing the world's advanced level in the field of full-forming flat knitting machine reflects the matching law of resource dependence and technical learning mechanism. In the two stages of catching up after reverse cross-border mergers and acquisitions and surpassing catch-up, Cixing adopted the learning mechanism of technological deconstruction and technological reconstruction respectively, because of the difference in the asymmetry of resource dependence between Cixing and Shitange at each stage, as well as the difference in Cixing's own knowledge accumulation.
In the catch-up stage after the reverse cross-border merger, Cixing lacks the core technology of the full-forming flat knitting machine, is relatively weak in technical knowledge, and has a large technical distance with the company, which forms an asymmetry of resource dependence. The high degree of resource dependence and weak technology accumulation determine that Cixing adopts the method of technological deconstruction to achieve the absorption of technical knowledge. Therefore, Cixing needs to fully understand the architecture and principles embodied in a given technical component and its modules, take the lead in absorbing the peripheral component technology of Matterage, and make up for the lack of early technical capabilities through "learning by doing" and trial production of new products, and gradually acquire product engineering capabilities.
In the catch-up stage after reverse cross-border mergers and acquisitions, benefiting from the accumulation of knowledge of technological deconstruction in the catch-up stage, the technological gap between Cixing and Shitange has gradually narrowed, and the asymmetry of resources between the two parties has been alleviated. The characteristics of China's domestic market are significantly different from those of developed countries, such as knitting manufacturers who pay more attention to product cost performance than technological advancement. Cixing has a deep understanding of this. On the contrary, Tange, who has been away from the market for a long time, lacks the necessary local market knowledge for R&D, and has formed a reverse dependence on Cixing. The weakening of resource dependence and the accumulation of previous technical knowledge have enabled Cixing to give full play to the advantages of downstream complementary assets such as marketing, regain the leading position in R&D, create new leading designs through technological reconstruction, and achieve product innovation.
Conclusions and Implications
Technological change will lead to the destruction of the original technical knowledge of enterprises to varying degrees, so late-developing enterprises not only need to obtain the necessary knowledge from the merged enterprises after reverse cross-border mergers and acquisitions, but also need to digest, absorb and reconstruct these knowledge. After Cixing's reverse cross-border merger and acquisition, according to the resource dependence and capacity accumulation at different stages, different technology learning mechanisms were adopted accordingly, which promoted the weakening of resource dependence and the improvement of technical capabilities, and finally realized the integration of the merged enterprises and the catch-up of the leading enterprises. Cixing's technological evolution shows that latecomers need to choose an appropriate technology learning mechanism according to the resource dependence of both parties in order to achieve technological self-reliance and self-improvement after reverse cross-border mergers and acquisitions, which provides meaningful enlightenment for the technological autonomy of latecomers.
First of all, latecomers need to switch between the two learning mechanisms of technology deconstruction and technology reconstruction in a timely manner. In the discontinuous change of the industry technology paradigm, late-developing enterprises can leverage reverse cross-border mergers and acquisitions to quickly obtain strategic resources such as knowledge, technology, and brand, accelerate technological learning in the window of opportunity, and achieve catch-up with leading enterprises. However, it is a relatively long and complex evolutionary process for latecomers to achieve technological autonomy after reverse cross-border acquisitions, which not only requires the M&A enterprises to change the state of resource dependence, but also needs to choose the appropriate technology learning mechanism. After the acquisition of enterprises in developed countries, the resource dependence and technology learning interact, and the technology learning mechanism is affected by the asymmetry of resource dependence between the two parties, and the knowledge accumulation brought by technology learning will change the degree of resource dependence between the two sides, and there is strong continuity, interaction and order between them. In the catch-up stage after reverse cross-border M&A, the late-mover enterprise has a large degree of dependence on the merged enterprise, and the late-mover enterprise absorbs the knowledge that is easier or can quickly bring benefits to the merged enterprise through technological deconstruction, and completes the initial accumulation of knowledge; in the later stage of the M&A, the late-mover enterprise needs to switch to the technology reconstruction mode in a timely manner, and reorganize and integrate the existing knowledge based on its own understanding of the local market to achieve product innovation.
Second, latecomers can make full use of their local market knowledge to grasp the autonomy of innovation. While latecomers are initially on the underrepresented side of the reverse cross-border M&A process, latecomers can take action to reduce environmental uncertainty and interdependence. Latecomers have a deep insight into the local market, and when the new technology knowledge accumulates to a certain extent, latecomers can make full use of this unique advantage, firmly grasp the initiative and dominance of new product innovation, integrate technical knowledge such as component knowledge, architecture knowledge, process knowledge, and other market knowledge with customer knowledge, marketing knowledge, etc., and dissolve the boundaries between different knowledge to achieve "bundled knowledge" (bundled). knowledge), realize the complementary advantages of knowledge, improve product innovation capabilities, and finally establish a differentiated competitive advantage in the field of new technologies.
About the Author | Peng Xinmin: Professor and Deputy Dean of the Business School of Ningbo University, Researcher of the Institute of Non-public Economy, Ningbo University;
Han Wenze: Master Student, School of Business, Ningbo University;
Zhang Qirui is a lecturer at the Business School of Ningbo University.
Editor-in-Charge | Gao Jingyang ([email protected])
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