Tasly’s,open,innovation,paradigm_tossgirl

　　Abstract: 　　 The change in the environment for innovation in the 1990s spawned a transformation in the mode of corporate innovation from “closed innovation” to “open innovation” and from pure “technology innovation” to complete “systematic innovation.” Open innovation provides strong assurance for systematic innovation, while systematic innovation provides a platform for open innovation. Therefore, the corporate technology innovation model shall be an open and systematic model that can be referred to as an “open and systematic innovation” model. The working mechanism of open and systematic innovation is to turn exogenous factors into endogenous capabilities through system support. In this paper, we present a case study of the innovation practices and results of Tasly, an industrial group of modern TCM in China, under the “environment-strategy-behavior-performance” analysis template. This case study offers insight into how to speed up Chinese enterprises’ independent innovation processes.
　　
　　Key Words:
　　Open innovation, systematic innovation, innovation paradigm, pharmaceutical industry
　　
　　
　　I. Review of literature and statement of issues
　　
　　A change in the external environment for innovation spawned a profound change in the corporate innovation paradigm in the late 1990s. The shortening product life cycle added time and cost pressure on technology innovation; the increasing technology complexity and faster speed of knowledge update called for greater specialization and division of work; the more extensive and frequent flow of knowledge increased the externality of technology innovation activity. Under the new innovation environment, an increasing number of enterprises began to seek external sources of innovation and pursue exchange and cooperation with external parties for the primary purpose of acquiring innovation resources, shortening the innovation cycle and reducing innovation costs and risks. This phenomenon has received close attention from academia and led to the coining of a new concept, “open innovation,” versus the old concept, “closed innovation.” Open innovation emphasizes that innovation sources include not only internal enterprises but also external enterprise resources. The corporate technology innovation process is open (Chesbrough, 2003).
　　In the 1970s and 1980s, some scholars noticed that innovation factors could be matched with one another to create synergy and enhance corporate technology innovation. This was referred to as the embryonic form of “integrative innovation.” In 1998, Harvard Business School Professor Marco Iansiti put forward the concept of “technology integration.” As a result, Iansiti was credited with coining the concept of integrative innovation for the first time. His viewpoint received extensive attention from scholars. Integrative innovation emphasizes that technology innovation and market demand shall be seamlessly integrated to resolve the dislocation between technology resources and actual applications (Staudenmayer and Cusumano, 1998; Tang, 1998; Mu Ling and Lu Feng, 2003). Another viewpoint holds that integrative innovation refers to the integration of technological innovation, organizational innovation and institutional innovation, and the building blocks of integrative innovation include technology, knowledge, organization, strategy and culture (Jiang Hui and Chen Jin, 2000; Xu Qingrui et al., 2002; Chen Jin, 2002; Yu Hao and Chen Jin, 2004). Based on the second interpretation of integrative innovation, this paper puts forward the concept of “systematic innovation,” which means that innovation factors such as technology, organization, management, mechanism and the market can be integrated to boost the efficiency and effects of the entire innovation system and create unique innovation capabilities and competitive advantages.
　　Theories and practices have proven that open and systematic innovation is important for firms to realize technology innovation under the current environment. At present, there is little research on the relationship between open and systematic innovation. Therefore, it is of theoretical and realistic significance to discuss the mechanism under which the two innovation models can be integrated to help enterprises better conduct technology innovation activity.
　　
　　II. The research thought and methodology
　　
　　This paper holds that open innovation and systematic innovation are mutually dependable and mutually reinforcing, and they shall be seamlessly integrated into corporate technology innovation success. On one hand, open innovation affords strong assurance for systematic innovation. A complete innovation system includes not only the technology R&D system but also the support systems from all areas. First of all, setting up an effective technology R&D system requires setting up well-defined technology R&D departments under the organizational structure and committing enormous resources like capital, equipment and talent. More often than not, an enterprise cannot afford to do this on its own. Secondly, setting up a massive technology innovation supporting system requires setting up a flexible organizational structure, scientific management approach, effective operating mechanism and effective marketing system associated with the technology R&D system. As a result, each enterprise is required to communicate and cooperate with external parties. On the other hand, systematic innovation provides a platform for open innovation. Pursuing open cooperation with external sources of innovation requires setting up a platform of linkage with the internal system. The systematic technology innovation system provides such a platform. First of all, the precondition for an enterprise to conduct open cooperation with external parities is that the enterprise shall put in place an independent in-house R&D department, a well-established R&D organization and a specialized R&D team. Secondly, the enterprise can boost organizational learning and absorption capabilities and enhance the value of open innovation only by establishing a complete R&D organization and conducting continuous R&D activity.
　　Based on the foregoing analysis, this paper puts forward a new corporate technology innovation model ? the “open and systematic innovation” model under which corporate technology innovation activity is conducted in an open system where the enterprise can acquire the innovation resources as needed from the external environment or join forces with external parties in the innovation process. Meanwhile, an enterprise can effectively promote the effects of its technology innovation activity and significantly enhance its technology innovation capability only by integrating such factors as technology, organization, management, mechanism and market within the innovation system.
　　According to the characteristics of issues under study, this paper uses an exploratory case research method to identify and analyze the working principles of the open and systematic innovation paradigm in corporate technology innovation practices and the effects of open and systematic innovation on enhancing corporate innovation efficiency and capability. The case study is based on the successful innovation practices of Tasly, an industrial group in the modern traditional Chinese medicine (TCM) industry. Traditional Chinese medicine is a nationally important industry in China. Achieving long-term development requires realizing modernization and internationalization. In the TCM industry, modernization and internationalization can be realized only by pursuing technology innovation. Tasly has successfully implemented the open and systematic innovation model. Under the new innovation paradigm, Tasly has significantly accelerated its pace of technology innovation and greatly boosted its technology innovation capabilities. Conducting an in-depth analysis of the way by which Tasly Group pursues open and systematic innovation is of reference value to other enterprises pursuing independent innovation.
　　
　　III. Working principles of open and systematic innovation: Turning exogenous factors into endogenous capabilities
　　
　　Under the open and systematic innovation model, an enterprise can pursue innovation in a more smooth and efficient manner through the seamless integration of internal and external innovation factors. The open and systematic innovation process is in essence a process of turning exogenous factors into endogenous capabilities through an innovation platform. Exogenous factors can be absorbed and converted into endogenous capabilities under three transformation mechanisms: “process participation,” “resource input” and “two-way feedback.” Table 1 provides a comparison of the three transformation mechanisms. During the internal and external interaction process, the internal R&D system, organizational structure, management method, operating mechanism and marketing system of an enterprise are coordinated to enhance the efficiency and efficacy of internal and external interaction. In particular, the internal and external factors are combined in the corporate technology innovation process to create an open and systematic innovation system.
　　
　　1. The process participation-type transformation mechanism
　　(1) R&D activity through industry-academia-research cooperation
　　In the current innovation environment, industry-academia-research integration has become a leading way of achieving technology innovation. Industry-academia-research cooperation is conducted mainly at the basic research and application research stages. Participation in industry-academia-research cooperation is either equity-based cooperation or agreement-based cooperation depending on the closeness of cooperation between both parties. Under the “science-based” technology innovation model, universities and research institutes are the major sources of innovative knowledge, and it is very difficult for enterprises to conduct technology research and development independently without the participation of universities and research institutes (Marsili, 2001). To better learn and absorb such critical knowledge, the internal corporate innovation system must provide adequate support in respect of organization, management and mechanism. First of all, industry-academia-research cooperation requires an enterprise to set up an in-house R&D department and staff it with top R&D talent. Only by doing so can the enterprise conduct more extensive cooperation on R&D and absorb knowledge from R&D partners. Secondly, project cooperation is a common approach of industry-academia-research cooperation. Successful project cooperation requires enterprises to possess extensive project management experience, top project management talent and strong project management capabilities. Last but not least, setting up an equitable and reasonable profit distribution mechanism and IPR protection mechanism is a key measure to ensure enterprise entitlement to final innovation achievements and the precondition for maintaining long-term partnerships. By pursuing industry-academia-research cooperation, an enterprise can boost its knowledge absorption, technology research and innovation activity management capabilities.
　　(2) R&D activity through the participation of user organizations
　　The user organization can participate in corporate technology innovation activity, especially at the product development stage, by way of a close information exchange or agreement-based cooperation. Under the “user knowledge-oriented” technology innovation model, the user becomes an important source of knowledge for technology innovation (Marsili, 2001). Therefore, the enterprise must establish a long-term information communication mechanism with the user organization in order to gain an in-depth understanding of the industry knowledge the user organization possesses. If necessary, the enterprise shall cooperate with user representatives on product development and ensure that the final product meets user demand. The enterprise must have an effective IPR protection mechanism in place to coordinate R&D cooperation activities because it relies on user organization in the functional design of new products. By conducting information exchanges and cooperation with user organizations, the enterprise can gain clearer knowledge of product application in order to boost its new product development capability.
　　
　　2. The resource input-type transformation mechanism
　　To conduct technology innovation activity, enterprises need to acquire external innovation resources like talent, technology and capital through market transactions and venture capital investments. First of all, due to the increasing technology complexity and the faster flow of knowledge-based talent, one enterprise could hardly employ every type of talent needed for technology innovation activity, and an increasing number of enterprises have begun to invite external innovation talents to join them. Therefore, each enterprise shall set up an open and flexible organization structure and establish an attractive talent recruitment, development and motivation mechanism. Secondly, not all technologies shall be developed by enterprises through their own efforts. Some generic and mature technologies can be acquired through market transactions. All enterprises shall keep abreast of technology classification and development status in the industries where they operate and standardize the technology purchase management procedures so that external technology purchases are well matched with internal technology innovation activity. Last but not least, corporate technology innovation activity entails strong capital support, and it is not realistic to rely exclusively on an enterprise"s equitable capital and bank loans for technology innovation. To conduct technology innovation activity, an enterprise shall raise funds through multiple financing channels. External innovation resources provide enterprises with stronger innovation investment capabilities and lay a solid foundation for R&D and innovation activities.
　　
　　3. The two-way feedback-type transformation mechanism
　　A two-way interactive relationship exists between end-users and enterprises. First, whether an innovative product or service can meet user demand is a fundamental criterion on whether the entire innovation activity succeeds or fails. At the product design stage, enterprises should give full consideration to user demand. Secondly, user participation in the new product experiment process has become a universal practice. At this stage, the user can provide timely feedback on product application and offer recommendations for product improvement. Therefore, the enterprise must establish an effective information feedback channel with users and set up flexible and diverse information feedback mechanisms such as market surveys and service hotlines. Finally, the enterprise shall map out and implement clear and effective marketing strategies and provide complete and convenient presale and post-sale services. Only by doing so can an enterprise successfully commercialize new products amid fierce market competition and guarantee innovation sustainability. By using demand information provided by end-users, the enterprise can improve innovation results on time and enable them to better meet user requirements and enhance product development capabilities. Meanwhile, targeted marketing and top customer service also help boost corporate commercialization capability.
　　
　　4. The virtuous cycle of absorption and transformation
　　The foregoing analysis shows that open and systematic innovation can turn exogenous factors into endogenous capabilities. The internal corporate innovation system plays an important support role in the transformation process. Actually the innovation system will be more attractive to exogenous factors when endogenous learning and absorption, product development, innovation investment and marketing capabilities are enhanced, thereby forming a virtuous cycle of factor absorption and transformation.
　　
　　IV. Tasly Group"s open and systematic innovation practices
　　
　　Tasly Group (“Tasly”) was incorporated in May 1994 and has been pursuing independent innovation for more than 15 years. While setting up a complete technology R&D system, Tasly has established an innovation support system with respect to organization, management, mechanism and market. Meanwhile, it has proactively conducted cooperation with R&D partners and kept the entire innovation system open to external innovation sources. For 15 years, Tasly has delivered remarkable innovation results and enhanced its independent innovation capabilities.
　　
　　1. Tasly"s independent innovation strategy selection: Market environment and technology features
　　Tasly selected an independent innovation strategy due partly to the tough competitive landscape on the TCM market and partly to the technological features in the TCM industry. In the domestic market, TCM products are stuck in a vicious circle of low-level competition due to product homogeneity; in the international market, foreign consumers have yet to recognize TCM and TCM drugs have not entered international mainstream markets. By contrast, “foreign TCM” has carved up domestic markets. In respect to technological features, the “process-based” TCM industry dictates that each enterprise must take core process innovation as a key point of breakthrough; the “science-based” TCM technology dictates the necessity of pursuing “open innovation;” the rigorous TCM product quality control standard dictates that industry chain innovation is inevitable. Presently, the TCM industry is undergoing a technology paradigm shift from the “secondary innovation” of improving product formulation and changing valid ingredients to the “original innovation” of breaking through traditional formulas and developing new ones. Based on an analysis of the independent innovation environment, Tasly has formulated an independent innovation strategy of realizing technology leadership through core process breakthroughs and is determined to realize the strategy through “open and systematic innovation.”
　　
　　2. Tasly"s independent innovation system setup: An open, systematic innovation paradigm
　　Tasly"s success is attributed not to a particular technology or the innovation at a particular stage but to the successful implementation of the “open and systematic innovation” model under which it has gained the technology leadership position in the industry. The “open and systematic innovation” model involves: forging partnerships with universities and research institutes with key TCM knowledge and technology, creating a complete technology chain based on the unique characteristics of new drug research and development, and setting up a systematic independent innovation system, including the primary technology R&D system and an auxiliary innovation support system.
　　(1)Constructing a complete technology chain under the “open innovation” paradigm
　　The new drug research and development process is characterized by high investment, high risk and a long cycle. Each enterprise shall conduct technology innovation activity in collaboration with external parties. Based on new TCM drug research and development characteristics, Tasly has adopted the “open innovation” model under which it has forged long-term partnerships with Harvard University, Zhejiang University, Tianjin University, China Academy of Traditional Chinese Medicine and the China-Japan Friendship Hospital. By conducting R&D independently and in cooperation or agreement with partners, Tasly has constructed a complete, new drug research and development technology chain extending from basic research through manufacturing and quality control to experiment and evaluation. Meanwhile, it has established a new drug development system characterized by “one generation of production, one generation of reserve, one generation of development and one generation of research” under way the same time.
　　Tasly built the new drug research and development technology chain by: 1) conducting independent research and development on core technologies and continuing to improve advantageous technologies. Tasly established the new TCM drug research and development platforms and technologies that are missing or weak while continuing to enhance the existing advantageous technologies such as TCM extraction and separation, preparation and quality control and achieving breakthroughs in new drug research and development equipment and technology; 2) conducting research and development on cutting-edge technologies in cooperation with R&D partners and jointly establishing R&D platforms. Tasly established long-term and stable strategic partnerships with universities and research institutes and realized the sharing of talent, equipment and information by jointly setting up a new drug research and development technology platform. As a result, Tasly can use the technology platform directly to conduct research and development on new drugs, such as research on component combinations, and drug effects and mechanisms. This has shortened the R&D cycle and increased the rate of success in cutting-edge technology development; 3) outsourcing auxiliary technology development and digesting and absorbing mature technologies. Tasly has made full use of existing drug research and development technology platforms and technologies like safety evaluation and drug discovery by way of outsourcing. Meanwhile, it has digested and absorbed technologies imported to realize de facto transfer of technologies into licensee enterprise and effective utilization of technologies by licensee enterprise; and 4) closely tracking technology developments while adjusting and refining the technology platform. Tasly has kept a close eye on new TCM drug R&D technology development trends and continues adjusting each technology platform and technology as per TCM R&D demand. Meanwhile, it improved the new TCM drug research and development technology chain and developed new TCM formulation such as a powder injection.
　　(2) Establishing a strong innovation system under the “systematic innovation” model
　　The pharmaceutical industry is a typical technology-intensive industry in which each enterprise sets up a strong, systematic innovation system for long-term technology innovation activity. The “systematic innovation” model offers enterprises the best choice. Tasly"s independent innovation system consists of a four-level core technology R&D system and a strong supporting system in each of the four areas of organization, management, mechanism and market to ensure smooth independent innovation activity (see Figure 1).
　　Tasly"s technology R&D system is composed of four elements: Tasly TCM Research Institute, Tasly Post-Doctoral Workstation, Tasly Industrialization Technology Platform and the technology research department at each subsidiary company. These R&D entities assume independent innovation tasks and work together to generate synergy along the chain processes of “basic research, new drug development, industrialization research, and process improvement.” Basic research achievements can be quickly transformed into productive forces through close collaboration between the R&D platform (which consists of the research institute and post-doctoral workstation) and the industrialization platform to further improve product quality and profitability. The technology research department at each subsidiary company communicates with the two R&D platforms on a regular basis to sharpen basic research focus and boost R&D efficiency and efficacy. In December 2002, Tasly Technology Center was named a national-level enterprise technology center built upon an effective and efficient technology research and development system.
　　 Tasly"s independent innovation process is a complete and systematic one. The flexible and open organizational structure provides an organizational basis for innovation activity. The “fenceless research institute” has attracted a great deal of top innovation talents; the high-level project management capability ensures project execution quality, and the advanced management method is used to boost innovation efficiency; the equitable and reasonable talent development and motivation mechanism can arouse maximum enthusiasm for innovation among employees and foster an innovative corporate culture; and the well-defined marketing strategy guarantees reasonable returns on innovation investments.
　　In respect of organizational support, Tasly has attributed its success in independent innovation to the flexible and open organizational structure. First, Tasly holds a controlling stake in a number of subsidiary companies specialized in research and development on solid preparation, powder injection and intermediate extraction technology. In addition, Tasly has a subsidiary company specialized in planting medicinal herbs and marketing herbal products throughout the TCM industry chain. This group-based business model has strengthened the connection between industry chain links and accelerated the pace of technology innovation. Second, Tasly has established a “fenceless research institute” that fosters open thinking and enhances corporate technology innovation capabilities. The Tasly Research Institute serves as a basic platform for technology innovation and operates under the principle of “focusing on application rather than ownership of technology and sharing the fruits and benefits of research.” To date, it has set up R&D centers, or conducted research projects, in partnership with a dozen research institutes in order to optimize and integrate R&D resources. Tasly has expanded the scope of talent utilization under a flexible and open organizational structure. As a result of its partnerships, Tasly can mobilize as many as 500 R&D specialists even though it has only 200 R&D experts.
　　In respect of management support, Tasly is a typical example of integrating modern management into the traditional TCM industry. Tasly has promoted and implemented project management and presently it has acquired strong project management capabilities. It was the first Chinese enterprise to win the prestigious International Project Management Award (IPMA) 2006 Silver Medal for Project Excellence. Tasly also employs state-of-the-art management techniques during routine production and operation to enhance corporate management expertise. For example, it has implemented the BPR and CIMS system and established the modern TCM production technology platform. Meanwhile, it has set up an advanced logistics distribution platform using the JIT and lean production method and Kanban management approach pioneered by Toyota. In addition, it has introduced the 6-sigma quality management system and established a numerical quality control model to ensure stable quality.
　　In respect of mechanism support, Tasly has created an innovative atmosphere and developed a top innovation talent force under an innovative mechanism, while establishing extensive partnerships with external parties and setting up an effective IPR protection system. First of all, Tasly allows employees to form an R&D team at their own discretion and apply to the company to conduct an innovation project. After receiving company approval, the team will obtain capital support for the R&D project, and the employees can apply for other projects regardless of whether the previous one succeeds or fails. Tasly adopts a new employment mechanism under which it is solely responsible for formulating a unified R&D plan, providing capital support and paying salaries. Under a results-oriented approach, each participant in research and development is given full decision-making power irrespective of nationality, workplace and work methodology. Tasly also has established the “demand-oriented training model,” implemented a corporate training management system featuring corporate development, talent development and voluntary participation, and organized diverse internal and external training activities. It has set up a “professional coach management system” under which senior managers coach core employees. Tasly has set up an employee stock ownership plan under which the company offers stock ownership to technology and senior management personnel, and it reserves stock ownership for future talent participation to ensure equal opportunity under the principle that “knowledge participates in profit distribution.” Tasly has proposed a “pharmaceutical innovation industry-academia-research alliance” with well-defined property rights and responsibilities and mutual benefits to develop critical technologies and formulate important standards. Tasly serves as an investor, consumer and user of technologies developed through innovation alliances. During the R&D management process, Tasly conducts project-based management and adopts different cooperation models for different projects and different technologies as per actual demand. Tasly operates under the IPR protection strategy to set up a composite patent protection system encompassing “core patent, peripheral patent, defensive patent and competing patent.”
　　In respect of market support, Tasly has laid out a clear marketing strategy and developed an innovative service marketing approach through multiple years of exploration. First, Tasly has set a marketing strategy of reinforcing its domestic markets while targeting international markets. On domestic markets, Tasly focuses on the urban medical, OTC and urban-rural markets based on market segmentation under a market demand-oriented approach. Meanwhile, it has adopted a marketing strategy of focusing on urban areas and penetrating rural areas, undertaking regional management and achieving key breakthroughs. On international markets, Tasly has set up two organization systems for international trade and international direct sale operations, and it established an international marketing model of promoting product distribution through direct sales and expanding from developing to developed countries. Tasly launched the “Tasly Health Star Journey” nationwide in 2001. During the national marketing campaign, the company invited consumers to visit modern TCM R&D, extraction and production facilities and communicate face-to-face with company officers, thereby setting up a platform of communication between the enterprise and the consumer. Tasly established a health service call center to support phone calls,faxes and email. The call center is equipped with accurate data record and statistics functionality. It not only serves as a platform of information sharing between the enterprise and the consumer but also enhances post-sale service quality and timeliness.
　　(3) Setting up an “open” and “systematic” innovation paradigm
　　Tasly"s independent innovation model constitutes an open and systematic innovation paradigm. It has realized seamless integration of open innovation and systematic innovation: No innovation system can be set up along the entire technology and industry chains without the participation of external innovation partners. It is impossible to receive such strong technical talent support without an open and flexible organizational structure. It is difficult to realize a smooth commercialization of technology innovation results without continuous communication and exchanges between the enterprise and the consumer; in turn, it is impossible to better absorb external knowledge and resource input without a systematic innovation system. It is unlikely to retain internal and external top innovation talent without an equitable and reasonable talent motivation mechanism. There is no way to ensure the enterprise can reap the benefits of open innovation without a scientific and effective profit distribution mechanism and IPR protection mechanism. Adopting a coordinated and unified innovation approach is a necessary condition for Tasly"s independent innovation model to succeed.
　　
　　3. Tasly"s innovation results: Corporate development and capability enhancement
　　Tasly has realized rapid business expansion within 15 years. By the end of 2008, it held 8.37 billion yuan in assets, generated 4.4 billion yuan in operating income and realized 6.6 billion yuan in sales. Tasly ranks No.2 in terms of competitiveness in the domestic pharmaceutical industry. Its leading products, composite salviae dropping pills and Yangxueqingnao particles, have a market share of 10% and 3%, respectively. The annual sales of composite salviae dropping pills have exceeded 100 million yuan for seven consecutive years.
　　Tasly"s rapid expansion has been built upon continuous independent innovation over 15 years. During the expansion process, Tasly has accumulated and enhanced its independent innovation capabilities. The path sequence is to: i) conduct innovation on the formulation of one drug; ii) realize commercial production of the drug; iii) expand such a success into innovation and production of a series of related products; iv) establish a complete industry chain of the leading products; and v) finally develop truly original innovative drugs. During the long journey of innovation, Tasly has undergone a profound shift from simple equipment processing and capability expansion to key extraction and preparation process capability development and then to quality control and standardization. Finally, it mounted a charge toward component preparation and combination capabilities. Ascension into each new stage is built upon the innovation capabilities accumulated in the prior stage.
　　Tasly"s rapid development and capacity expansion is inseparable from the successful implementation of the open and systematic innovation model. Under a well-established cooperative mechanism, Tasly has acquired basic scientific knowledge and enhanced technology research capabilities through the long-term close-knit industry-academia-research integration. During the long-term project cooperation process, it has established strong innovation management capabilities by leveraging high-level project management capabilities and project management talent. Under an open and flexible organization structure and an effective motivation mechanism, it has attracted a lot of top innovation talent and enhanced its innovation investment capabilities. Based on a worldwide survey of cardiovascular and cerebrovascular patients, it has established a marketing strategy with clear objectives. Tasly has enhanced new drug development and commercialization capabilities by setting up multiple consumer communication and feedback channels and providing satisfactory services under the consumer-first philosophy. The formation and accumulation of such capabilities has enhanced corporate attractiveness to exogenous factors and accelerated transformation of the exogenous factors into endogenous capabilities, thereby forming a virtuous cycle of factor absorption and transformation.
　　
　　V. Conclusions and thoughts
　　
　　In light of the foregoing theoretical analysis and case study, we are in a position to conclude that the “open and systematic innovation” model is a model under which an enterprise can realize seamless integration of internal and external factors through systematic innovation. Meanwhile, the enterprise can leverage the synergy of multiple factors to effectively enhance corporate technology innovation efficiency and capabilities while expanding the sources of corporate innovation. Given the special operating environment and actual strength of Chinese enterprises at the present time, it is unrealistic to rely solely on a closed innovation paradigm to realize the national strategy of turning China into an innovation-oriented country. The ambitious strategy can be realized by taking enterprises as technology innovators and encouraging them to set up a systematic technology innovation system in each enterprise and pursue open innovation in cooperation with universities and research institutes. By doing so, China can catch up with and even overtake developed countries in key technology research and development areas.
　　In this case study, we also arrived at the following thoughts:
　　First of all, industry chain innovation integration is not replicable. Tasly"s success in developing an innovative product-composite salviae dropping pill can be mainly attributed to the innovative integration realization model under which Tasly Group internally innovates the industry chain extending from new drug R&D through medicinal herb planting, TCM extraction and preparation production to final product marketing. In reality, however, this method cannot be extensively replicated on a large scale. Take medicinal herb planting as an example: A scientific and pollution-free GAP herb-planting base provides important assurance for drug quality and safety and holds the key to winning amid fierce competition. On one hand, this requires making enormous investments in talent, capital and equipment; on the other hand, it requires investigating local weather and soil conditions, seeking vigorous support from local governments, consulting with farmers and sending professional personnel to train herb growers. Although Tasly has successfully established the GAP medicinal herb planting base for three key components of the composite salviae dropping pills, it is not realistic for one drug maker to plant all medicinal herbs even on a large scale. Pharmaceutical enterprises can improve drug quality through a cooperative arrangement under which each enterprise specializes in planting a specific number of medicinal herbs and shares resources through agreements or market facilities. Industry chain innovation is an inevitable trend of development, but it can be achieved only through extensive cooperation among multiple innovation parties.
　　Secondly, the open and systematic innovation model is well matched with the corporate technology innovation strategy. The corporate technology innovation model selected by an enterprise must match its technology innovation strategy. The strategic goal of any enterprise adopting a “technology leadership strategy” is to acquire the industry"s most advanced technology through research and development and to take the lead in developing and commercializing the cutting-edge technology. It is therefore critical to acquire external sources of innovation through long-term close-knit partnerships (such as joint research and development centers or long-term project cooperation) under the open innovation model. The enterprise"s systematic innovation factors include technology, organization, management, mechanism and market. The strategic goal of any enterprise adopting the “technology catch-up strategy” is to benchmark R&D activity against the industry"s leading enterprise and finally catch up with and overtake the leading enterprise in terms of technology. Open innovation is equally important to such enterprises. Based on the positioning of the new technology in its innovation process, the enterprise can use an integrated approach of long-term close-knit and long-term loose cooperation (such as talent and information exchanging on a regular basis). The enterprise"s systematic innovation factors mainly include technology, organization, management and mechanism. The strategic goal of any enterprise adopting the “technology follow-up strategy” is to conduct technological improvement over the industry"s existing mature technologies during new product development and commercialization processes in order to deliver better innovation results and higher innovation efficiency. The enterprise makes limited investments in technology R&D and shall adopt short-term loose partnerships (such as short-term project cooperation). Attracting and retaining core technology talent is critical to the enterprise"s survival and development. Therefore, its system factors are mainly reflected in the talent mechanism. The above analysis indicates that the “open and systematic innovation model” is ideally suitable for any enterprise adopting the technology leadership strategy.
　　Third, we offer some thoughts on innovation system construction and innovation policy orientation for regions in China. Setting up a regional innovation system helps enhance open and systematic innovation. Economic development, innovation factor aggregation, infrastructure and platform construction, and local government policy support help promote open and systematic innovation among enterprises. Innovation policy shall be tilted in favor of small and medium-sized enterprises and shall promote continuous cooperation on innovation. In China, enterprises actively conducting technology innovation activity and making remarkable achievements are mostly large enterprises with at least one high-profit business to support their R&D investment. This is what is lacking in most small and medium-sized enterprises. It is thus required to use policy means to create favorable innovative conditions for such enterprises. Last but not least, sustainable cooperation on innovation will affect the innovation effect and capacity formation. Sustainable cooperation can enhance mutual understanding, increase the rate of success in technology innovation, create a higher input-output ratio and realize capacity accumulation and continuation within each enterprise. Government agencies should vigorously promote long-term and in-depth cooperation among enterprises, universities and research institutes in some particular technology areas. In particular, government agencies should proactively develop a flexible and effective cooperation mechanism and properly handle profit distribution and IPR protection issues. Open innovation will yield more tangible effects through government stewardship and coordination.
　　It is important to note that the above conclusions were reached under the single-case study method and their universal relevance needs further justification. It is undeniable that conducting an analysis of a typical enterprise selected from a typical industry is the best way to examine the current status and issue of corporate technology innovation in China. In the future, it is imperative to use a multi-case study method in our research on innovation management in order to better examine the effects of the factors, such as the background of an industry or region and the characteristics of an enterprise, on corporate technology innovation activity.
　　
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　　Note:
　　
　　* Grant Funded Project: This paper is a part of the CASS key research project, “A study of the policy for promotion of independent innovation of Chinese enterprises” (Grant No.: 2008YZDA0608). It is also part of another CASS key research project, “A study of the corporate innovation strategy in the emerging strategic industries” (Grant No.: 2009YZDN0103).

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