Unintended Technology Transfer to Chinese Software Firms from Japan Through Offshore Software Development

Abstract

Since the end of the 1990s, some Chinese software firms have undertaken offshore software development for Japanese firms. They are engaged not only in coding and testing, but also in design. The results of our interviews with Chinese and Japanese firms show that Chinese firms have acquired design skills through these joint developments. Japanese firms did not intentionally implement technology transfer, but the practice of offshore development did have this effect. In addition, we identify that the main reasons Japanese firms entrusted software design to Chinese firms were quality control and cost reduction of their software development projects. Currently, Chinese firms are employing the transferred skills for their own domestic projects, indicating that the export of software services has contributed significantly to the expansion of the domestic market. We conclude that China should focus on both domestic supply and export of software services as a strategy for developing its own software industry.