Unleashing the power of innovation(2)

Engineers work at Bell Labs in Shanghai. Many multinational companies have set up their R&D centers in China.CHINA DAILY

Abrami, a senior fellow in the department of management at Wharton School, speaking from Hong Kong, says there is no issue with the innovative or intellectual capacity of the Chinese people.

"The institutional structures are such that although China has made tremendous leaps and bounds in terms of process innovations and spin-offs, you are not seeing these disruptive innovations."

The Chinese government set itself the target as far back as 2006 to transform the country into an innovative society by 2020 and a world leader in science and technology by 2050.

However, some doubt there is a direct relationship between R&D effort and economic performance.

Edmund Phelps, the Nobelprize winning economist and director of the Center of Capitalism and Society at Columbia University, believes there may be no link at all.

"It is curious that some industries have a lot of R&D going on and others do not. If you look at national data you see Germany is right up there in terms of R&D but it happens to focus on one or two industries that are relatively heavy on R&D. I just don't think R&D data is very meaningful or helpful."

Phelps, also dean of New Huadu Business School at Minjiang University in Fuzhou and author of Mass Flourishing, which raises innovation issues, also does not believe that despite Apple iPhones and the new information age, the current period is a great innovation age.

His measure of innovation success is its impact on economic productivity. He says it is clear that more advances were made in the late 19th century and from 1920 to 1960 than now.

"Productivity growth has slowed markedly from the late 1960s and early 1970s. I take that to mean that either innovation has shrunk as a slice of the economy and that Silicon Valley wasn't enough to offset that diminution of innovation elsewhere or maybe that innovation doesn't have as large an impact on productivity as it used to."

Gong Li, senior managing director and chairman of global management consultant Accenture China, says China has a problem with bringing up groundbreaking research.

"R&D in China is more about the 'D' than the 'R'. There are about 110 products of which China is the largest manufacturer in the world but only about 10 of them have enough IP (intellectual property) in them to be a China product," he says.

Gong, who was a scientist himself majoring in physics at Fudan University and doing a postgraduate degree in electrical engineering at the University of Houston, says there is still too much of a "rush mentality" in China that hinders basic research.

"Research takes years and there might not be any benefit immediately from it. But Chinese companies want a return in three years. As a result it is not an easy environment for basic research."

Han Jian, associate professor of management, who is also co-director of the CEIBS Centre on China Innovation, agrees there is some evidence that there is a skills gap that makes blue sky research difficult in China.

She has recently conducted panel research with the R&D heads of 15 multinational and Chinese companies as part of the innovation center's recent findings conference.

"One leading Chinese company's R&D head said there was still a lack of really innovative people with, in particular, maths skills. He also said there was a lack of people able to express ideas in a logical and comprehensible manner and to come up with a holistic picture that can be defended and analyzed."

However, Han has problems with seeing R&D success at individual country level since much of it is conducted by multinationals and is industry specific.

"The main priority for the multinationals in China is building teams. It is not just about having enough really smart people but about motivating the people who are not so smart. These people are often doing most of the work, and it is about them being a meaningful part of the jigsaw."

Abrami at Wharton says there is also a lack of capital for early-stage entrepreneurs in China compared with the US and Europe.

"The lack of angel investors compared to what we see elsewhere is a problem. I think also there is less scope for failure in China.

"If you think of Silicon Valley, it is almost a badge of pride about how many companies you have been involved with that have bombed. I don't get a sense there is a lot of room for that in China," she says.

A major issue for R&D in China remains IPR.

McKern at the Hoover Institution says it has been a major issue for foreign multinationals in China.

"They have always been looking for ways to prevent leakage. The big change here, however, is that Chinese companies who have developed their own technology are clamoring for protection and putting pressure on the government," he says.

Klaas Vegter, who heads electronics company Royal Philips NV's R&D in China, says there can be too much focus on IP protection and research in China.

"In my personal view, IPR is overstated. In many markets, the product lifecycle right now is so rapid the idea you can protect IPR is almost ridiculous. The average patent lifecycle is 17 years, and for the product just one to two years."

Vegter says a distinction now has to be made between core DNA technology and the products that appear on the shelves in shops.

"We have made a distinction between innovations that are secret processes and products which are assembled, even if there happens to be 10 years of research behind them," he says.

"If you assemble anything and bring it to market, three months later it is copied."

Regardless of the IP issue, there can be no doubting the government support to R&D in China.

There is increased investment in the research bases of the universities and there are more than 100 science and technology parks across the country.