THE GLOBE
FOREIGN R&D CENTERS
BLOSSOM IN CHINA
1999
Fewer than 30
entirely fake Apple stores filled with employees who think they work for the U.S.
company.
Still others blame the Chinese education system, with its modernized version
of what the Japanese scholar Ichisada
Miyazaki calls “China’s examination hell.”
How can students so completely focused
on test scores possibly be innovators?
From our decades of field experience
and research in China, and the dozens of
case studies we have collectively produced,
we see some merit in all those views (but
we must point out that many of the most
innovative Western firms were founded by
engineers). Those criticisms don’t tell the
entire story, however. China has no lack
of entrepreneurs or market demand. And
given the government’s enormous wealth
and political will, China has the potential to
set the kind of economic policies and build
the kind of education and research institutions that propelled the U.S. to technological dominance. But will that potential be
realized? We see considerable challenges.
A look at how innovation is happening
in China—from the top down, from the bottom up, through acquisition, and through
education—sheds light on the complexities
of the issue, highlighting the promise and
the problems China faces in its quest to become the world’s innovation leader.
Innovation from the Top Down
In its 2006 “Medium- to Long-Term Plan
for the Development of Science and Technology” (MLP), the Chinese government
declared its intention to transform China
into “an innovative society” by 2020 and a
world leader in science and technology by
2050. That was not empty talk. Beijing has
a solid track record of setting policies and
incentives, and then watching citizens and
local government officials, right down to
the village level, fall in line with them.
For nearly 40 years, in fact, the Chinese
government has been using its wealth of
funds and political will to stimulate innovation from the top. In the 1980s and 1990s,
China created the National Natural Science
Foundation and the State Key Laboratory
3 Harvard Business Review March 2014
2004
600
2010
More than
1,200
SOURCES BEIJING REVIEW, ASIA TIMES, PEOPLE’S DAILY ONLINE
program, and revamped its Soviet-style
Chinese Academy of Sciences to fund precommercial university research on a peerreviewed (rather than a political) basis, in
much the same way that the National Science Foundation does in the United States.
At the same time, the state, with support
from regional governments, financed the
development of high-tech zones to further
innovation commercialization. Since 1985,
when the first such zone was developed,
in Shenzhen, they have proliferated to the
point where they are a common stop on official tours of any major Chinese city.
The power of the government to shape
nascent innovative industries can be seen
in the effects of its policies on the wind
turbine industry. In 2002 the government
launched an open bidding process for wind
farm projects to encourage competition
among turbine makers. Foreign imports
soon flooded China’s fledgling market. In
a pattern that it would repeat in other industries, the government then required
state-owned enterprises to source 70% of
their components from domestic firms.
Foreign firms continued to invest directly
in China, but by 2009 six of the top 10 wind
turbine firms were Chinese. This capped
off a remarkable growth spurt in domestic
firms’ share of total sales, from 51% in 2006
to 93% in 2010.
The aim of the 2006 MLP was to reduce
China’s reliance on imp