China’s innovation dilemma

Compared with the rest of the world, China’s doing all right. The world’s second-largest economy is the massive engine that’s pulling along much of the developed world right now. Yet China’s leaders face a crucial long-term challenge: how to lift its sluggish innovation performance? As Fast Company’s Linda Tischler writes, China’s ability to innovate will be hampered by deep cultural forces, particularly in creating an ecosystem conducive to ideas and creative thinking. Such barriers aren’t quickly overcome. In the 2010-2011 Innovation for Development Report, prepared by the IMF, the OECD and the United Nations, China is ranked a less-than-impressive 61 out of 131 countries. China-watchers Anil Gupta and Haiyan Wang, authors of Getting China and India Right, contend that the very measures Beijing has used to foster Chinese innovation have stifled it. “Virtually every assessment of the indigenous innovation program has framed it as a win-lose proposition—a win for China and a loss for foreign multinationals,” they say. “Our analysis, however, suggests that indigenous innovation measures have been counter-productive for China itself. Instead of inducing technology giants to shift leading-edge R&D work to China at a faster pace, its effect has been exactly the opposite.” Essentially, foreign companies don’t trust China as a secure location for such research, they say. With its liberal R&D environment, India is proving far more attractive to foreign firms, despite China’s larger economy and market, bigger stream of PhDs and its fourfold spending on R&D. “Beijing is standing in the way, because it’s looking at the problem from the wrong angle,” Gupta and Wang argue. “Instead of trying to extract technology from foreign firms today, it should be creating a hospitable environment for these firms to create and train world-class innovators.”

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