2. Literature review and contextual factors in China
The critical path to successful industrial innovation is both internally and externally driven, which is also arguably achieved in a series of sequential steps [3]. Dunphy et al. argue that technology innovation at the firm level occurs when there is, first, a scientific discovery from anywhere in the world. The new idea (or discovery) leads to an invention or to the application of new technology in the form of a product or a process, by an individual or an organisation. Last, the invention (or product) is commercialised or the idea (the process) is adopted by the community of practice [3] (also see [49] and [50]). It is not always clear, however, whether Chinese firms have gone through these steps sequentially. Mathews, in his study of dragon multinationals, argues that technology innovation for some East Asian companies is a dynamic process which involves many elements, such as strategic management of resources and activities relating to the internal and external organisational environments [4] (see also [51]). Hence, it is important for managers, as advised by Peter Drucker, to be disciplined and alert to the internal and external factors that could have influenced firms' innovation [56]. With this advice, internal and external factors affecting innovation capabilities and performance of Chinese firms are evaluated.