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The advantages of this strategy are twofold. First, partnering with a Chinese producer could further reduce Samsung’s average cost by exploiting a cheaper labor (Chinese labor is on average 57% cheaper, see Exhibit 7a). Second, partnering with a Chinese company could potentially enable Samsung to get government subsidy which could then use to increase its R&D budget. However, this strategy has its disadvantages. To start, IP rights in China are not well protected so there is a great risk of giving away information for free in the case that the partnership didn’t work out or there was some information leakage...
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