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By the 1990s the pressures on traditional stock exchanges were so intense that inertia was no longer an option. These pressures included the globalization of investment, deregulation, dismantling of capital controls, cheap and rapid communication, and powerful computing, The effect was to undermine the grip that exchanges had once exerted over national stock markets. No longer were the members of exchanges the filter through which buying and selling passed because of the control they exercised over access to both information and the market. Alternative means of trading stocks were proliferating, undermining and then destroying the exclusive privileges long enjoyed by those belonging to stock exchanges. Leading this attack on the power of stock exchanges were the megabanks. As these banks grew in scale and scope, extending their activities around the globe, they were either able to internalize many transactions or trade between themselves. In the process they cut out the exchanges, bypassing, and the charges and restrictions they imposed. There had long been an ambiguous relationship between banks and exchanges, as they were both rivals and heavy users. The combination of the megabanks, interdealer brokers, and electronic markets was rendering exchanges redundant in the 1990s, forcing them to respond through diversification and mergers.

This chapter summarizes the evolution of the state policies in technological innovation in the last 60 years. Between 1950 and 1980s, China’s international isolation led to the techno-nationalistic approach, prioritizing defense sectors. State controlled R&D activities were separated from production. In the 1980s, China turned to a market competitive model and embraced foreign technological transfer. In the 1980–90s, the state was directly involved in establishing state-owned or joint-venture enterprises and practiced import substitution under the rubric of “trading market for technology.” The policy, along with export promotion policy succeeded in expanding China’s production capacity, but was disappointing in improving China’s technological innovation. The “indigenous innovation” policy installed since 2006 reasserted the central role of the state in promoting innovation, but employed more diverse and flexible approaches through finance, tax, procurement, and domestic industrial standard policies, among others. Local governments and non-state firms also become more prominent players

This chapter aims to explore the progress of indigenous innovation in Chinese car industry. The technological capability of Chinese local car-makers developed remarkably slowly in the 1980s–1990s, until the situation was changed by the entry of a group of newcomers. This chapter argues it was exactly the national strategy of “trading market for technology”, associated with the governmental intervention and manipulation of FDIs, that shaped a learning pattern previously in local leading firms that depressed creative attempts at learning. The newcomers stressed the organizational mobilization for learning, and acted as integrators of global technologies from their early stage on. The different strategy and learning patterns led to the significant difference of capability among these firms, particularly in term of capability in generating new products and technologies. The entries of newcomers have changed both the structure and the benchmarks of learning organizing in the Chinese car industry.