Innovation in environmental technologies in china: The case of feida’s power plant pollution control equipment

Innovation is important for developing a strong brand. This chapter introduces a leading provider of environmental solutions for power plants in China. Feida is a company located in the Zhejiang province in China that develops products and technology to remove small particles from the exhausts of coal-fired power plants. The chapter describes the company’s evolution towards a leading company in environmental technology in China and analyzes the role of R&D and innovation in its brand development. The chapter further assesses how the nature of the company’s innovation is connected to the production and functional/user side of the innovation system and institutional environment in which it operates. Feida’s strategy is to expand internationally to foreign markets but it is facing significant challenges in that process.


Introduction
The availability of electricity plays a pivotal role in China's economic development and much of its electricity has been produced by coal-fired power plants. In the past decades between 70% and 80% of the electricity generated in China was based on coal (Yuan et al. 2018). Alongside the benefits of coal-fired power generation there are significant negative side-effects. They include air emissions which can lead to increased local air pollution and contribute to climate change. In recent years the focus has shifted from ensuring that economic growth can be facilitated by electricity generation to a more sustainable growth based on cleaner and greener electricity generation (NEA 2016;Lin 2017). For coal-fired power generation this has triggered an increasing use of counter-acting measures to reduce air emissions and their harmful impacts, globally as well as in China (Metz et. al. 2001;Hofman 2005 -To what extent can the company be considered as a global leader and why?
The chapter will continue with a short introduction of the history of Feida, followed by a more detailed analysis of innovation in Feida and its role in brand building.
Consequently, we will focus on the international position of Feida and compare Feida's strategy and innovation with a leading global player. We end with some recommendations and a number of questions that could be central to a teaching case on strategy and innovation in emerging market firms.  The firm provides a series of products, including electrostatic precipitators (ESP), flue gas desulphurization equipment, fabric filters, pneumatic conveyor equipment, hazardous solid waste treatment equipment, and electrical control equipment. It also provides technical guidance and installation services both in China and outside of

The connection between innovation and branding
Various studies have identified and confirmed the significant influence of innovation on brand performance (Agarwal, Erramilli, and Dev 2003;Beverland, Napoli, and Farrelly 2010). In fact, the most well-known companies in the world are often also at the forefront of innovation; consider, for example, firms like Apple, Siemens, General Electric, Unilever, Volkswagen, Bosch, Alibaba, Alstom, and so forth. There are also many well-known brands from Asian companies such as Toyota, Honda, Samsung, and Hyundai, whose success has been a combination of providing quality and value for money next to innovation strength (Kapferer 2012). In a well-known textbook on strategic brand management it is mentioned that innovation is like 'oxygen' for a company's brand (Kapferer 2012, p. 202). A steady flow of innovation may be necessary to remain attractive to customers; this can be a range of incremental innovations or every now and then a new business model or pioneering innovation, depending on the industry in which the firm is active (Srinivasan et al. 2009). In a competitive industry environment, a company's internal learning ability is critical for its innovation capabilities and innovation output, and the significance of its innovation output influences the company's reputation and brand performance (Weerawardena, O'Cass, and Julian 2006). Apart from internal sources and capabilities for innovation, it is well established that the nature of innovation in firms is also connected with the context in which it operates which can be represented by a broader innovation system. "The capability of a firm to innovate is therefore not solely determined by internal factors, such as its strategy, culture and organization, but also by the nature of a firm's interaction with external actors, such as knowledge institutes, government organizations, users and capital providers" (Hofman and de Bruijn 2010, 116) and institutions such as regulators of the electricity sector and power plants as in the case of Feida. These interactions are shaped to some extent by firms themselves, but also significantly by the nature of the innovation system in which they operate. This innovation system shapes the direction of innovation and consists of various actor groups that are connected to the production, use, and function of the innovation practices. Figure 2, based on Geels (2004), illustrates the various actor groups involved in innovation systems. From the perspective of the production side, the firmlevel innovative practices could be influenced by scientific knowledge (e.g. universities, public and private laboratories), capital (e.g. venture capital suppliers, banks, insurance firms), technologic/design knowledge (e.g. design firms, technical institutes, consultancies), transfer of knowledge (e.g. school, universities), labor/human resources (e.g. laborers, skilled personnel), tools/machines (e.g. suppliers of materials, components, tools). For the functional/user side, the innovation system approaches could also be affected by the factors of public authorities (e.g. government), societal groups (e.g. NGOs), consumers, and media (e.g. TV, newspapers, magazines).
Our description and analysis of Feida will be embedded within the context of this innovation system. The purpose is to understand what key actors and institutions influence Feida's innovation, analyze to what extent Feida is connected to the most advanced innovation actors related to emission control of power plants (such as knowledge institutes, research centers, and other companies), and assess how Feida could further advance its innovation as well as its branding.

Figure 2
Elements of firm-level innovation system practices Source: Geels (2004)

Technology innovation at Feida
Technology innovation has been one of the main elements of the company's strategy.

Technology Innovation Strategy
A continuous focus on technologic innovation is critical for Feida to maintain its leading position in the industry. Generally, the evolution of technology in Feida has been driven by three main factors, namely the needs of the market, the internal capabilities and strategy of Feida, and its links to international leading companies (Wu, Wu, and Sun 2001). Figure 3 shows the evolution of Feida's technologic innovation strategy. Feida firstly developed its own products by relying on its own technology and resources. After the development of this first generation product, Feida has kept on improving the performance of the product through careful analysis of customers' feedback and by reducing the gap between their product and the products provided by leading international competitors. One of the pathways Feida has used to improve its technology performance is through the purchase and importing of key technology from abroad and by collaborating with foreign companies.   (Wu, Wu, and Sun 2001).
It was also the first enterprise to develop ESPs for circulating fluidized-bed boilers and alkali-recovered boilers in China. Feida has been awarded 7 different certifications as the developer of first equipment on national and provincial levels.
The details of first product innovation is depicted in table 2.

Factors Contributing to Technology Innovation
The technology innovation process in Feida is fostered both from the production and the user side. In Figure 4, the blocks filled in black (technologic knowledge, labor/human resource, public authorities) represent the factors that most strongly affect innovation at Feida; the blocks filled in dark grey (transfer of knowledge, scientific knowledge) represent the second most influential factors; the blocks with light grey (capital, consumer markets) represent the third most important factors, and the groups represented in white (tools, societal groups, media) have the least influence on Feida's innovation.

Technology innovation at Feida
Tools/machines  Table 3   In addition, it holds more than 200 domestic patents in total, the majority being utility model patents but among them also 25 invention patents which are regarded as the most significant patents in the Chinese patent system. Figure  It also has not obtained international patents due to unfamiliarity with the international patent system. The company however is aiming to increase its income from international activities significantly so may have to consider developing an international patenting strategy. Invention patent Patent for utility models Software copyright to field trips, testing, and after-service. Moreover, it provides incentives for staff to be involved in R&D, for staff in technical and marketing positions, and at a management level. It encourages employees to apply for patents. For instance, 50,000 RMB will be awarded for an invention patent and an "Innovation Award" is provided for technical and managerial innovation.

Public authorities
The public authorities refer to those entities who make new policies and occasions (Feida, 2017).

Partnership and market competitors
Feida has developed partnerships (i.e. focusing on technology import and joint ventures) with international leading companies to improve its products. Table 4 presents the examples of partnerships. For instance, a license agreement between has been successful in some international projects; however, due to having limited experience in the international market and its limited exposure to international competition, Feida has also suffered some setbacks in its international expansion. Societal groups, tools/machines, and media The societal group refers to civil society organizations and non-governmental organizations (examples are Greenpeace or consumer groups), while the tools/machines category is about suppliers of materials, components, and tools (Geels 2004). These dynamic systems provide opportunities for companies to improve their products and achieve product innovation. Nevertheless, because of the nature of the industry and the relatively weak position of NGOs in China, Feida has paid less attention and effort to these groups.

Internationalization of Feida
International expansion is a vital strategy for Feida to expand its markets and to create new sources of income and profits. In recent years the company has set up subsidiaries in India and Singapore. In May 2016, with 70% of the shares owned by Feida, Feida International Power Technology Co. Ltd was established in Singapore. Its main business is in power generation based on biomass, waste, and coal and targeted towards Southeast Asia. Compared to Western competitors, Feida offers cost effective products to the market, at about one third of the price of Western companies. It has already generated some success in providing high quality products to customers at affordable prices (see picture 3 for example), and combining this with reliable aftersale service, which has earned the trust of various international customers.
Feida is utilizing two types of exporting strategy: whole set exporting and direct exporting. Whole set exporting refers to its emission control systems being sold as part of a larger deal such as power plant construction through cooperation with big state-owned companies, including Dongfang Electric Corporation and TBEA Xi'an Electric Technology (Zhou, Ma, and Weng 2015). Direct exporting refers to selling its emission control systems directly to international competitors. For whole-set exporting, the profits that Feida can make are limited, whereas this profit potential is higher in direct exporting. However, whole-set exporting involves limited political and management risk for Feida as these are covered by the main company in the transaction. The exporting data from 2013 to 2017 is depicted in Figure 6. It can be concluded from the data that the exporting trade is dominated by whole set exporting as it occupies 82%. For direct exporting Feida needs to strengthen its expertise in overseas markets to make sure that it will not suffer losses due to its inexperience with overseas local markets and politics. The problems Feida recently encountered in India with one of its projects showcase the importance of understanding overseas markets and having good relations with overseas partners and customers. Another important strategy for "going out" are projects signed with "One Belt One Road" countries. In 2017, Feida has been involved in a 2.2 billion dollars project in Jordan (Feida 2018c).

An example of a leading global competitor, Alstom
With over 100 years' experience, Alstom is experienced in power generation services, turnkey power plants, air quality control systems, and carbon capture equipment. With the Thermal Power sector sales figures of 6163 million euros in 2014, Alstom is a market leader in environmental-protection activities for the power generation sector.
As Alstom's energy and power systems activities were acquired by the General Electric Company in 2015, we will mainly focus on the performance of its emission control systems for power generation before 2015.
The key priorities for the Alstom Thermal Power sector are to deliver operational excellence and good service to achieve high customer satisfaction. The company is involved in different development projects to improve the emission efficiency of coalfired power plants, and these projects are partly funded by the European Union and the US Department of Energy. Alstom's innovation has been strongly R&D driven through intensive R&D programs over the past years. This R&D and innovation is guided by technologic and economic challenges of reducing emissions of fossil fuelbased electricity production. There are 17 "R&D execution" centers across Europe, North America, and Asia (Alstom 2011). Their major responsibility ranges from technical support, to conducting cutting-edge activities that will create innovative products. It is estimated that the total number of Thermal Power R&D employees and its associated partners is over 2,500, among which 10 are Senior Experts, 132 are Experts, and 430 are Principal engineers (Alstom 2014

Challenges for Feida
With its goal of international expansion, one of the challenges that Feida faces is its limited experience with and knowledge of overseas markets. The main business of Feida is located domestically in the environmental-protection equipment for coal-fired plants. The viable domestic market tends to be shrinking and is highly competitive, as there is excess capacity in thermal power generation while renewable technology development is supported by the local government. Therefore, international expansion is essential for Feida. As India has a strong base in coal-fired power plants, and is facing challenges to limit the air emission of these power plants, it comes as a priority for Feida's internationalization under the strategy of "going out". However, the company has encountered problems in the Indian market as it had difficulty adapting to this different international environment, and has a lack of management experience, talent, expertise, and knowledge of international markets. Consequently, it suffered a significant loss in 2017 on a collaborative project in India with BGR Energy Systems Limited.
Part of the challenge Feida is facing is due to its limited exposure to the market, international environment, and competition. With the efforts and contribution in four decades, Feida has obtained a leading position in the air quality industry in the domestic market. The nature of its industry in China requires the company to put significant effort into building good relationships with (local) government(s) and responding to their needs. This has implied that the company has been much less exposed to the international market and the competitive pressures from international markets. It has also led to a technologic development trajectory that is mostly domestic and only involves very limited international activities, projects, and R&D efforts. This is reflected in the gap between Feida and international leading companies such as Alstom, with regard to patenting behaviors, international R&D projects, and training and talents programs.

Ways to move forward for Feida
Some of the ways forward for Feida include further development of its international innovation activities, a strengthening of its R&D and innovation activities with international and external partners, and finally a strengthening of its talent training and recruitment.
The first suggestion is to implement more internal innovation actions and programs.
A series of management procedures and tools (e.g. incubators, ventures) are encouraged to build an innovative and dynamic atmosphere, stimulate the innovative mind, and encourage the expression and the sharing of ideas and knowledge. For instance, SUEZ, a leading company in the environmental-protection domain, established an experimentation lab within its company, while Siemens developed open innovation activities to enhance innovation projects and activities among its employees, cross-cutting various departments. Acting as an incubator, it helps to share the innovative minds, and nurture and support projects in terms of commercial and industrial support.
It is also recommended that Feida can increase its R&D and innovation activities with external and especially international partners. Competition in a more open environment can help companies to quickly respond to market changes and customer needs. Feida can also promote "open innovation", where cooperation with academic and scientific partners is encouraged. Moreover, partnership culture is encouraged to be active through local public or private players (industrial, financial, or non-profit org) with an in-depth knowledge of the local context. This could substantially decrease the potential cost, share the technology and information, and help Feida to develop dynamic and innovative products. Programs such as an incubator with top universities, and venture programs for SMEs and innovative companies, could be good examples to support innovation eco-systems.
The final suggestion is associated with developing systematic employee training and recruiting more talents. Various training programs and continuing training initiatives framework are advised to help employees to learn specific knowledge or skills in the industry. This includes domestic and international training of personnel by top industry experts, opportunities of attending relevant conferences, and the high-value added courses with academic professionals. In addition, more talents who have access to international business knowledge and cutting-edge technology, and are aware of differences in foreign institutional environments, need to be recruited. give to Feida to further strengthen its innovation and branding strategy?

Further Investigation
3. Feida has a strong presence in the emission control systems for power plants and is now considering to further develop other areas of business including solid waste treatment and water pollution treatment. Discuss what the rationale is for Feida to consider moving into these areas and assess current strengths and weaknesses of Feida that could help or inhibit them to be successful in these new business areas.