Innovation in the Local Context – A Case Study of BYD in China

In this paper we have used the case of BYD to examine firm innovation in the China context.
From a historical perspective, with its strategic diversification from battery to mobile phone
manufacturing to automobile manufacturing, we find that BYD has been innovative in its
production method, vertical integration strategy, and design of product for local customers. The
effective understanding and leveraging of local contextual factors including supply of labor
(especially low cost-highly skilled labor), growing middle class, and local industry environments
have played important roles for BYD’s innovation in China.