Developing emerging industries through innovation of business model: The case from Guangdong LED industry, China

China is accelerating the process of developing strategic emerging industries to adjust its industrial structure and transform the mode of economic development after the world financial crisis and European debt crisis. In one of China´s most innovative provinces, Guangdong government has selected light emitting diode (LED) industry as one of its policy focus in the “12th Five-Year (2010-2015)” period. Besides traditional fostering measures as “technological push” and “market pull”, Guangdong government introduces new business model that stimulates LED industry a rapid growth from 39 billion RMB output value in 2009 to 151.5 billion RMB in 2011, accounting for more than 70% of total LED output value in China by now. This paper first introduces the current situation of Guangdong LED industry and government policy support, and then proposes an interactive model including factors of “technological push”, “market pull” and “innovation of business model” to analyze the development of emerging industries. Focusing on innovation of business model, this paper gives an in-depth analysis on the practice of “Energy Management Contract (EMC)” and “Benchmark System” in Guangdong Province. It shows that the new business model sharply reduces risk taken by LED users to speed up market growth meanwhile forces LED firms continuously improve technology to enter the market, therefore effectively solves a dilemma that “immature technology” interlocked with “immature market” in the starting period of LED industry. In the conclusion, this paper offers some policy suggestions for LED industry in Guangdong and some potential implications for industrial policy when it comes to the development of emerging i