Contextualising digital innovation in today's China: Local practices and global contributions

In 2008, Information Systems Journal published a special issue on Information Systems (IS) in China (Davison et al., 2008), which greatly encouraged IS scholars to conduct high-quality research in and about China. Between 2008 and now, China continued to prosper in the global economy. One distinctive force driving China's economic growth and transformation has been the ongoing innovative design and use of digital technologies in advancing manufacturing production, generating new business models, and addressing societal challenges. As noted in a McKinsey Global Institute (2015) report, China has evolved from an innovation 'sponge' that absorbs and adapts existing technologies and knowledge from developed countries to a global innovation leader in developing and experimenting with a variety of new digital services. This has been evident in its dominant market share and size of e-Commerce and mobile payment worldwide in the past few years (Abkowitz, 2018; Aldama, 2017). In discussing digital innovations in today's China, practitioners and scholars need to first understand the shaping role of the unique Chinese context. The Chinese digital innovation path is heavily embedded in its economic and social setting. Namely, it is the world's second largest economy, having fast-developing manufacturing and technological infrastructure (McKinsey Global Institute, 2015), and a unique societal and regulatory environment (Bu et al., 2021). The economic prosperity creates a large and dynamic consumer market. In particular, the rise of the middle class characterised by their familiarity with technologies, ever-changing product preference, and purchasing behaviours, and high expectation in consumption experience plays a decisive role in fuelling the country's digital economy. The fast-growing digital products, services, and businesses are fundamentally driven by solving this new generation of consumers' pain points and meeting their needs. Furthermore, the large market size allows many new Chinese digital ventures targeting at even niche markets to rapidly scale their user bases and achieve financial sustainability (Huang et al., 2017). Besides the large number of affluent and Internet-savvy consumers, another contributing factor comes from major changes in the supply side of digital products. Over the past decade, 'a deep network of suppliers, a large skilled labor force, and a well-developed logistics infrastructure' (McKinsey Global Institute, 2015, p. 62) has laid an important foundation to support the digitization of products and services across different industry sectors. Several comprehensive manufacturing ecosystems co-locating in close proximity have emerged and thrived in the country, exemplified by the well-known digital ecosystems in Shenzhen and Suzhou. These places offer easy access to talents, knowledge, and business networks, thus fostering the growth of innovation-based Chinese and foreign technological ventures (Ambler, 2017). The co-creation and complementary solution through the ecosystem leads to a virtuous cycle of accelerating the generation of new knowledge, shortening the product development life cycle, and securing financial resources to support quick launch of new digital businesses. The third element in shaping China's digital economy is its societal and regulatory structure. As previously mentioned, the booming economy led to the growth of the middle class and new generation of consumers. These consumer cohorts are more willing to experiment with an earlier version of the products and more open to offer usage feedback to help organisations improve product features and services (McKinsey Global Institute, 2015). Institutional contexts, such as government policies and regulations, and the large numbers of state-owned enterprises (SOEs), are equally crucial in shaping digital innovation practices in China. Many have observed that in supporting the growth of the digital economy, the Chinese government provided the space for e-commerce companies to experiment and test their products on the market before stepping in with a more authoritative recommendation and comprehensive regulatory guidelines (Bu et al., 2021). For example, it was not until 5 years after Alipay first launched its mobile barcode-based payment services in 2011 that the government decided to release a regulatory standard on this form of mobile payment. Such a unique consumer culture and structural properties offer great opportunities to developing context-specific factors that may stimulate and regulate digital innovations in China. Thus, similar to Martinsons and Davison's (2016, p. 267) argument that 'the (People's Republic of) China that we study in 2016 is decidedly different from the same country in 1996', this editorial calls for studies that contextualise the dynamic, fast-evolving, and unique characteristics surrounding the development and adoption of digital innovations in today's China. Such studies not only contribute greatly to the understanding of digital innovations in China, but also have great global implications. Contextualised understanding can have practical implications for global companies interested in competing in the Chinese market. Their success in today's China necessitates local knowledge in formulating appropriate digital business strategies to gain and maintain their competitiveness in this particular market. Similarly, the same insights can benefit China-based tech companies hoping to go global. Learning what works in China would help them adjust their digital business models when expanding abroad. In a wider scope, the scholarly knowledge of Chinese digital business models and digital transformation can also be highly valuable to start-ups, incumbent firms, and governments in other developing countries in terms of how to accelerate the growth of their own digital economy. Given the attention China's digital economy has received in recent years, this special issue editorial team searched for related articles published in the Senior Scholars' Basket of Eight Journals between 2016 and 2020. We identified 38 papers examining different forms of digital innovations or businesses in China either empirically or theoretically, ranging from social media marketing (e.g., Wang et al., 2020), e-commerce platforms (e.g., Cheng, Fan, et al., 2020; Li et al., 2018), crowdsourcing (e.g., Du & Mao, 2018; Ye & Kankanhalli, 2017), fintech (e.g., Du et al., 2019; Jiang et al., 2018), to the sharing economy (e.g., Guo et al., 2019; Zheng et al., 2020). Despite the relatively high number of publications, we found that in the majority of publications, the Chinese context was only relevant in empirical data collection and analysis, for example, the use of consumer datasets from Chinese digital platforms, namely Taobao or Didi (e.g., Guo et al., 2019; Li, Fang, et al., 2019), or recruited experiment participants (e.g., Cheng, Fu, et al., 2020) or survey respondents from Chinese consumers or students (e.g., Chuang & Lin, 2017). At the theoretical level, we could only identify six articles that theorised and empirically investigated how context-specific factors affect digital innovation in China. For example, Liu et al. (2018) investigated how Chinese entrepreneurs take advantage of guanxi to fill structural holes in knowledge sharing and transfer, and Li, Du, et al. (2019) used activity theory to explain the role played by local governments in rural poverty alleviation in China. Reinforcing our earlier comments on the unique technical, economic, societal, and regulatory environments in China in driving the success of its digital economy, we believe that there are fruitful opportunities and unexplored constructs for theoretically insightful and practically important research in the IS field. At the minimum, the sheer size and speed of growth in China's digital economy provide a fertile context to test and refine the digital innovation theories originating elsewhere. More interestingly, and perhaps more importantly, the continuing emergence of new digital artefacts, new digital business models, and digital transformation practices in China offer great opportunities for theoretical building on how and/or why the digital innovation phenomenon occurs, succeeds, or fails (Barney & Zhang, 2009). Below, we list a few promising areas for future research. We do not claim that the list is exhaustive. It is mainly based on our own research experiences and observation of the current practices in China and includes areas where the specific Chinese social and institutional setting are critical or where its digital innovation practices are leading the rest of the world, thus deserving more research attention in the near future. The first such area is the digital business strategy and transformation in businesses with unique Chinese characteristics. In particular, we suggest more studies are needed to investigate the digital transformation phenomenon in two types of businesses: SOEs and those with deep historical and cultural roots. Compared with private enterprises or SOEs in other countries, Chinese SOEs receive higher levels of government support; at the same time, their operations are also subject to stronger government interventions. Their participation in market competition is not completely profit-driven, and their investment strategy is largely determined by institutional policies (Xu, 2011; Yi et al., 2017). Innovation practices in these companies are distinctively different from private enterprises or SOEs in other countries (Abrami et al., 2014; Jia et al., 2019). Considering that SOEs contribute around a quarter of China's GDP, and that Chinese government has aimed to continuously improve the competitiveness of SOEs through digital transformation (Genin et al., 2021; Harrison et al., 2019), studying digital innovation by SOEs is of both theoretical and practical importance. In addition to SOEs, the fast-growing Chinese economy and fast-changing digital landscape have put many traditional companies who enjoyed success in the past in limbo. Some businesses have offered products and services that have thrived over such a long period of time that they are considered as having unique historical and cultural significance. Such businesses were officially recognised as time-honoured businesses (老字号) (Zhang et al., 2021). Many of them are having a hard time adapting to the new digital economy, often struggling to strike the tricky balance between digitising their offerings and maintaining their historical and cultural heritages. However, there is hope for success. For example, at the end of 2010, the merchandise arm of the Palace Museum opened a storefront on Taobao.com but it was not successful in gaining traction for its online business. The museum continued to explore and experiment with different digital business models. In the summer of 2013, the museum finally realised a new success through the use of crowdsourcing and social marketing to develop and advise more than 6700 new products, leading to a roaring success of its online presence (Long & Li, 2020; Wang, 2018). As younger generations of Chinese consumers rediscover the time-honoured offerings and many such brands enjoy a comeback in China (Song et al., 2021), it will be very interesting to observe how traditional companies can make similar breakthroughs through the innovative use of digital technology and new digital business models. The second area is the crucial role of Chinese government policies in shaping the development and application of digital innovations. China's economic development is greatly affected by the governments' strategic industrial planning and policies, more so than any other country in the world (Barkema et al., 2015). The transformation of the manufacturing industry is a good example. Through years of effort, China has become the world's manufacturing superpower. To reach full-scale digitization of manufacturing, in 2015, China announced its ambitious 'Made in China 2025' plan. In response to the government's plan, many manufacturers have engaged in digital innovation practices, such as smart manufacturing, digital manufacturing platforms, and smart factories (Li, 2018; Zhou, 2015). Currently, China is also implementing a New Infrastructure Plan, which includes investing heavily in a new information infrastructure featuring technologies such as 5G, IoT, artificial intelligence, and cloud computing. At the same time, the Chinese government began to heavily regulate the Internet and education companies, which would have major implications on the evolution of digital innovations in these industries and beyond (Huang, 2021). This unique approach of government influence in facilitating and regulating digital transformation across industries may not be fully explained by existing digital innovation theories (Nambisan et al., 2017, 2019; Yoo et al., 2010, 2012). Thus, we believe that there are abundant research opportunities. To name some, how do Chinese structural and institutional properties influence the digital transformation of China's manufacturing industry? How will the new information infrastructure affect Chinese companies' digital strategies and shape their digital transformation journey (Li et al., 2020)? How will the recent changes in government regulations change the competition landscape for tech companies? How can tech companies best respond to these changes? The third area is the intersection between social development and digital innovation. As the Chinese economy grows, the country is paying increasing attention to social development, highlighted by its efforts to eradicate absolute poverty by 2020 and its goal of achieving common prosperity by 2035 (Lugo et al., 2021). Subsequently, using digital technologies for social innovation and inclusion is an emerging trend in China. For example, Zheng and Yu (2016) investigated how the Free Lunch for Children, one of the most successful NGO campaigns on social media in China, effectively utilised Sina Weibo to attract the public's attention in the nation-wide charitable program. Li, Du, et al. (2019) revealed how a prefectural government has innovatively deployed market-based poverty alleviation approaches through the development of a robust rural e-commerce ecosystem. Digital innovations are also transforming charity fundraising in China (Jiao et al., 2021). Due to the unique historical, social, and political background, the nonprofit and social sectors in China are decidedly different from those in other countries (Qin, 2017). Social digital innovations in China with thus also be different. We look forward to more in-depth research in this area. Another two interesting research areas are the study of China's incredibly successful e-commerce sector and the new digital artefact and solutions developed in China. In recent years, we have witnessed successive waves of e-commerce innovations emerging in China, from omni-channel marketing to online-to-offline retail (Wan & Chen, 2019), from social commerce to WeChat businesses (Wang et al., 2020), and from short videos (Wang, 2020) to live streaming (Guan et al., 2022; Hou et al., 2020). While early generations of e-commerce companies in China were often modelled after their global counterparts, newer Chinese entrants such as WeChat (Kharpal, 2019), Pingduoduo (Natanson, 2019), and Douyin (Liao, 2018) are increasingly based on original ideas or bearing characteristics unique to themselves and becoming trendsetters. Developing a deeper understanding of how digital ventures adopt digital technologies to rapidly grow the user base and survive fierce competition can contribute greatly to the existing digital innovation literature and practices. Finally, the new digital artefacts and digital solutions that originated in China could become a tantalising area for IS researchers. One case in point is the concept of middle platform first introduced by Alibaba (Tao, 2021). While traditional service-oriented architecture (SOA) decoupled the front-end user interface from back-end service computing such as database support, Alibaba found that as new forms of businesses emerge and grow, so do the data requests to back-end servers, especially for companies of as large a scale as Alibaba. The two-tier architecture can soon result in performance bottlenecks on the server side. In 2015, Alibaba launched its middle platform strategy to 'build a more flexible organizational and business mechanism featuring a large middle platform and small front-end' (Tao, 2021). The middle platform allowed Alibaba's new group-buying platform to go live within 6 weeks, with dramatic savings in development time and cost. Other influential tech companies, such as ByteDance and Tencent, have adopted this concept into their own IT architectures. Historically, technological innovations such as SOA and cloud computing have transformed business computing and offered IS scholars fruitful research opportunities (e.g., Choi et al., 2010; Marston et al., 2011). As the middle platform gains popularity among practitioners, it will demand more attention from IS researchers. With the aforementioned background, this special issue received a large number of abstract and full-paper submissions. After one research workshop and a thorough three-round review process, we were only able to accept two articles for publication. The reason was that the majority of submissions collected data from China, but failed to incorporate the Chinese context in their research. We consider that two accepted papers are well situated in the current digital innovations in the e-commerce industry in China; both theoretical developments are deeply rooted in the Chinese context, and both use it to justify their choice of theoretical bases and constructs involved in the study. The first article, by Che et al. (2022) and titled 'Online prejudice and barriers to digital innovation: Empirical investigations of Chinese consumers', attempts to understand consumers' channel selection in an increasingly congested market featuring both competition and collaboration between online and offline channels. The authors draw on confirmation bias theory and note how two cultural cues of Chinese consumers, low uncertainty avoidance, and high cynicism, may make them more biased toward online shopping and make it easier to detect both online prejudice and its effect on channel selection. The second paper, by Guan et al. (2022) and titled 'What influences the purchase of virtual gifts in live streaming in China? A cultural context-sensitive model', examines the monetization of live streaming in China, where live streaming is red hot. The authors highlight the differences between live streaming in China and those in other countries, emphasising the importance of a lively social atmosphere and intensive social interactions among streamers and viewers to live streaming the former. Additionally, they explicitly incorporate two cultural characteristics, social orientation and harmony, into their research model and empirically verified the roles they play in affecting viewers' purchase intention of virtual gifts. In conclusion, the papers in this special issue provide two good examples of how to situate digital innovation research in the unique Chinese context and contribute to the existing digital innovation literature. We hope the editorial and the papers in this special issue can inspire more research efforts in understanding the design, creation, and application of digital innovations in China and further examine in what way these findings are relevant to other contexts. The special issue research workshop was supported by the following funds: National Natural Science Foundation of China, Grant/Award Numbers: 72172036 and 72072181; Fundamental Research Funds for the Central Universities in UIBE, Grant/Award Number: CXTD10-06.