China　has　been　known　as　the　paradise　of　counterfeit　consumer　products　from　designer　clothes　and　luxury　watches　to　music　CDs　and　movie　DVDs.　In　recent　years,　an　emerging　trend　of　bandit　products　(＂Shanzhai＂　in　Chinese)　especially　in　the　consumer　electronics　area　indicates　that　there　might　be　something　more　than　just　copying.　There　have　been　ongoing　controversies　about　the　legitimacy　of　the　bandit　gadgets.　This　paper　explores　the　current　phenomenon　of　prevailing　bandit　gadgets　from　a　theoretical　perspective.　Drawing　upon　the　theory　of　innovation　and　Resource-Based　View,　this　research　intends　to　answer　the　following　questions:　Can　bandit　gadgets　be　considered　a　form　of　innovation?　Under　what　conditions　can　bandit　gadgets　be　beneficial　for　the　long-term　performance　of　the　SMEs　in　China?　The　paper　consists　of　the　following　sections.　The　first　section　will　introduce　the　background　of　the　Shanzhai　phenomenon.　Literature　on　innovation　and　imitation　will　be　reviewed　and　applied　to　the　phenomenon　of　interest　in　the　section　that　follows.　The　third　section　will　discuss　the　relationship　between　intellectual　property　and　the　bandit　gadgets.　The　paper　concludes　with　an　expectation　of　benefits　and/or　hindrance　bandit　gadgets　may　have　on　the　long-term　performance　of　SMEs　in　China　and　a　discussion　of　future　research　directions.