has been described as spectacular. The
World Intellectual Property Organization
(WIPO) received majority of patent
filings from Asia. The US filed the greatest
number of patents in 2018 but China is
expected to surpass the US within the
next two years.
Trade Wars Can Be Good
for Innovation
The ongoing trade war between the US
and China offers great lessons on the
impact of trade wars on global innovation
initiatives. Technology innovation, in this
case 5G network technology is at the core
of the trade war. The US has blacklisted
Huawei a Chinese company for suspicion
that the firm is using its technology to
spy on US activities. Huawei on its part
has argued that it respects intellectual
property laws and has breached none.
This begs the question of whether the
escalating trade war is about trade. The
war is really about who will lead global
innovation in the 21st century. 5G
network technology will open up a new
digital world that leverages technology
to access fast internet, increase use of
autonomous cars and artificial intelligence
(AI). The country or firm that launches
5G first will enjoy the pioneering status
of this game changing technology. The
winner will take it all.
In a recent interview, Huawei CEO Ren
Zhengfei explained how Hauwei stands
to benefit from the US ban. “Huawei is
going to climb this mountain. And if we
meet the US at the top, we will embrace
them...” He stated. Ren affirmed that
the ban will accelerate Huawei’s internal
innovation efforts. Ren noted that most
of Huawei employees had become
complacent but are now being forced to
survive (innovate) due to the trade war.
Surviving the trade war requires not
the strongest, nor the most intelligent,
but the one most responsive to change
(Charles Darwin). It is fair to note that
China is quickly adapting to the changes
that are as a result of the trade tariffs.
Huawei is already planning to launch its
own Operating System which it has been
developing as a plan B to counter the
ban from using the Android OS for its
phones.
The Downside of Trade
Wars on Innovation
Trade wars bring with them global tit-
for-tat protectionism. In the quest to flex
economic muscles, countries engaged in
trade wars lock out potential ideas from
outside markets crippling cross boarder
innovation initiatives. Free flow of
information and international knowledge
spill over is a trigger for innovation which
may not be possible when trade wars exist.
Companies that enjoy protection from
external competition lack the incentive to
innovate in order to ‘escape’ competition
from rival companies. The opposite is
true for free markets where trade barriers
do not exist. Companies seeking to
outperform their rivals in free markets
must run (innovate) twice as fast as its
competitors in order to win.
Bringing it all Together
To effectively tap into the benefits
of global innovation, participating
economies must respect intellectual
property laws and trade secrets which
seek to protect inventions. Lack of trust
triggers protectionism which if followed
by retaliation can escalate into trade wars.
Trade wars can force companies to
innovate because of the need to survive
like the case of Huawei. Although this
seems good for innovation, sustainability
of such efforts is yet to be proven. On
the down side, trade wars impede speed
of innovation as it limits the triggers of
innovation. Protectionism encourages
companies to be less aggressive as it
locks out potential rivals and guarantees
markets for a firm’s product or services.
Senorine Wasike is an innovation
champion with over 10 years’
experience in FMCG, currently
working as the Innovation
Commercialization Manager at
Kenya Breweries Limited. You can
commune with her on this or related
matters via email at: Senorine.
[email protected].