The essence of "卷" (juǎn) lies in intense, often self-defeating competition, leading to diminishing returns on investment. The term "卷王" refers to companies that dominate this kind of hyper-competition through aggressive cost and efficiency strategies. "Involution Trap" describes the strategic pitfalls these companies encounter when technological paradigms shift. Chinas manufacturing sector, once hailed as the "worlds factory," benefited greatly from "卷 culture." However, many firms that failed to pivot strategically have fallen into what is now termed the Involution Trap (卷王陷阱).

From the perspective of innovation management, Prof. WU Xiaobo (Distinguished Expert of Zhejiang Province, Professor at ZJUSOM and Director of Zhejiang Universitys Innovation Management and Sustainable Competitiveness Research Center), Ph.D. candidate LIN Fuxin, and M.Sc. student WU Cailingze examine the phenomenon and offer strategic suggestions for sustaining competitiveness.

"卷王" (Involution Champion) describes enterprises that leverage management and technological improvements to offer high-quality products at lower costs, with Ford Motor Company as a historical example.

Through assembly line innovations, Ford increased production speed eightfold and dramatically reduced the T-Model’s price, making cars accessible to the masses. By 1921, Ford commanded over 50% of the market.

The Involution Trap occurs when companies overly focused on cost and process innovation fail to adjust during technological paradigm shifts. Heavy sunk costs in outdated assets and persistent strategic inertia lead to financial decline and loss of competitiveness.

Clearly, far from slowing a company down, anti-involution measures can refresh brand image and generate unexpected positive returns.

The Case of Suntech Power

The solar industry showcases Chinas manufacturing rise — and its risks. Suntech Power, once a sector leader, is a case in point. Starting with module production, Suntech rapidly expanded through innovation and capital operations, achieving global top rankings and listing on the NYSE in 2005.

However, reliance on long-term raw material contracts and heavy capital expansion left Suntech vulnerable. As polysilicon prices plummeted (see Figure 1), losses mounted.

By 2011, Suntech faced over $6 billion in losses and crushing debt. It entered bankruptcy proceedings in 2013 and collapsed in 2014.

Innovation management missteps included:

■   Misjudging technology trends by over-investing in low-efficiency thin-film technology.

Suntech’s downfall illustrates the Involution Trap, emphasizing cost at the expense of strategic adaptability and innovation.

Polysilicon leader GCL-Poly initially thrived, but advances like PERC monocrystalline cells quickly shifted the industry, with Longi Green Energy rising to dominance.

This reflects the solar industry’s rapid technology trajectory fluidity.

Technology trajectory refers to the evolution of a specific technology path over time. Fluidity denotes how quickly such paths change.

Initially, multiple routes (thin-film, multicrystalline, monocrystalline) competed. Later, PERC innovations significantly boosted monocrystalline efficiency, making it the market leader by 2021.

Figure 2 shows ongoing competition among new technologies like TOPCon, heterojunction, and perovskite solar cells.

Firms trapped in involution typically over-invest in manufacturing efficiency, creating organizational rigidity.

Companies must distinguish between product innovation (developing new functionalities and market solutions) and process innovation (enhancing production efficiency). Both are critical, but they serve different strategic goals.

Automation upgrades primarily represent process innovation aimed at short-term cost reduction, not long-term market leadership.

According to the U-A model (Figure 3), early-stage industries prioritize product innovation. As markets mature, process innovation becomes more dominant. Emerging market firms often over-rely on process innovation, risking stagnation without shifting to original innovation.

Post-reform, many Chinese firms rapidly scaled through cost-focused strategies but struggled to transition toward new technology development, falling into a "catch-up trap."

The "secondary innovation" model emphasizes the need to shift from importing technologies to fostering original innovation for sustainable success.

In today’s high-quality development era, systematic reflection on the Involution Trap is crucial. Its root cause lies in insufficient attention to product innovation, especially in industries with high technology trajectory fluidity.

Geely Auto provides a positive example: From launching budget models in 1998 to becoming Chinas largest private car manufacturer by 2017, Geely progressively built its global R&D strength.

Development stages:

■   Pre-2003: Knowledge accumulation through reverse engineering and process improvements.

■   2004–2008: Investment in proprietary technologies and product innovations like Free Cruiser.

■   Post-2009: Global acquisitions to build a forward-looking R&D network.

■   In 2015, Geely launched the "Blue Geely Action," aggressively transitioning into new energy vehicles by forming innovation ecosystems through investments and partnerships.

■   By 2020, Geely unveiled the SEA architecture for EVs, and its premium brand Zeekr, launched in 2021, quickly gained market recognition.

Prof. WU Xiaobo stresses that escaping the Involution Trap requires "upstream integration", linking industrial chains with innovation networks, particularly by collaborating with universities and research institutions to strengthen innovation sources.

- You can read the original article in Chinese  here