6. Discussion
6.1. Implications to theory This study contributes to the literature in three ways. First, the results reveal that company standards significantly and positively affect product and process innovation, which is consistent with existing empirical evidence (Fixson and Park, 2008; Wright et al., 2012). Standardization is often investigated at the macro-level, and studies have usually focused on the socioeconomic and technical factors that lead to industrial or national standards and the implications on public policies (Blind, 2013; Saltzman et al., 2008). This study contributes to the standardization literature by employing a micro-perspective and providing insights into the relationships between company standards and product and process innovation (Blind, 2013). Some researchers argue that standardization may have negative effects on innovation (Thompson, 1965; David and Rothwell, 1996). This study provides empirical evidence that this conventional wisdom deserves second thought for manufacturing companies in China. Compared with Western manufacturers, Chinese manufacturers lack competence and skills for developing cutting-edge inventions and rely on inward technology licensing (Wang et al., 2015). Chinese manufacturers tend to develop new products and processes by reverse engineering and localizing Western products and adapting existing technologies to Chinese markets (Breznitz and Murphree, 2011; Lim et al., 2013). These innovations focus on the linkages among core components or modules and usually do not overturn the core design concepts of a technology or a product (Henderson and Clark, 1990). Company standards build a foundation for such innovations because they assist manufacturers in adjusting functions or subsidiary parameters of a component (Henderson and Clark, 1990). Moreover, company standards help manufacturers rapidly adjust and adapt supply chains in response to changes in product designs and customer demands (Baud-Lavigne et al., 2012). Innovations made by Chinese manufacturers are usually compatible with dominant designs, and focus on developing new features, functions, or benefits for existing products and processes, which depend on the exploitation of existing knowledge (Breznitz and Murphree, 2011). Standardization enables manufacturers to systematically formalize and record past experiences and knowledge, improving their knowledge base and the ability to assimilate and apply knowledge (Lin et al., 2012). Therefore, company standards enhance product and process innovation in Chinese manufacturers. This study thus elucidates the context where standardization positively affects innovation.
