Transcript Science and Technology in China

Brussels
Science & Technology in China
Some Issues
Prof. Dr. Max von Zedtwitz
[email protected]
+86 135 0106 4914
+86 10 6278 9797
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China is Undergoing a Massive Economic Expansion
Fastest economic expansion ever!
CAGR 80-00: 9.6%
CAGR 00-10 E: 7.8%
Real GDP
(US$ Bn)
•2500
Growth
Time period
China’s 20 yr
economic
reform
7X
over 20 years
Japan post
WWII
recovery
6X
over 25 years
2nd Industrial
Revolution
3.5X
over 60 years
1st Industrial
Revolution
2.5X
over 100 years
•2000
•1500
•1000
•500
•0
•1980
•1985
•1990
•1995
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•2000
•2010E
Source: China Statistical Yearbook; BCG analysis
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S&T is on the Agenda
• Increasing S&T literacy
• Shift towards Research
• Intellectual Property Rights
• Building competitiveness
• … and many others!
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China’s Agenda for S&T: Increasing S&T Literacy
• R&D amount to about 1.5% of GDP in 2004, up from 0.7% in late 1990s
• Annual growth rate of 15% between 1991 and 2002, far more than the average
growth rate of Western economies (2-3%)
• Expected focus of national innovation system:
• Basic research
• University expansions
• National science foundation
• Information and telecom infrastructure
Challenges
• OECD countries, India will react (Japan has increased R&D to GDP ratio by 1% to
3.2% within a decade, too)
• Only 5% of China has tertiary education: much potential (US: 37%, Europe: 24%),
but also much to do to catch up
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In China, Number of Graduate Students is Increasing Fast
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Relative Share of Graduates from Different Faculties
Philosophy
Economics
Sciences
Engineering
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China’s Agenda for S&T: Shift to Research
• In many areas, China is still in the stage of external technology assimilation
• However, foreign R&D activities are poorly integrated in the Chinese N.I.S.
• Focus is on technology absorption and generation of production capacity
• As long as markets are expanding, there is no need to invest in research and
much incentive to spend on marketing, distribution, manufacturing competence
Assessment
• Once external technology inflow subsides, necessary infrastructure of original
innovation may be missing and may take a long time to build up (example: Japan)
• Continued investment in production know-how
• Withdraws talents from research
• Establishes a path dependency with respect to sunk costs
• Lenovo-IBM: Buy into a dying industry?
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Foreign R&D Fairly Independent from Chinese Innovation System
Cooperation with Chinese Academies and Research Institutes
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2003: 154 bn RMB (15 bn Euro) R&D in China
About 60% corporate, 30% gov’t R&D, 10% universities
About 380 R&D central gov’t labs and 4’000 labs in provinces
CAS, MOST, NSFC
Good infrastructure with respect to spin-offs and S&T parks/incubators
Problems:
• Tsinghua, Fudan, Beida, etc.:
Exaggerated expectations in terms of
own value (still, costs per project
comparatively low)
• Most lack project management ability
• Few professors speak English
• Loss of IP(?)
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 No brain drain observed in
MNC – CAS collaborations
 MNCs get little sponsorship
from NSF or MOST programs
 Little spill-over (training, etc.)
observed (Wang 04, Yuan &
Lu, 05)
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Relevance: Why is China attractive for Foreign R&D?
• Majority of foreign R&D sites established for market reasons
• China a potential market of 1.3 billion customers
• Growing wealth of Chinese population
• Fairly inaccessible local science and technology
• National R&D intensity: about 1.5% (advanced countries: about 2+%)
• Increasing number of Chinese patents and Chinese papers
• Total of 743’000 scientists and engineers annually (second worldwide)
• WTO and domestic reforms (IPR, law enforcement, VC, etc.)
• Bright people available for good price
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BEA Systems, 2002: First ever int’l R&D site in China
LG, 2002: Largest int’l R&D site in China
Motorola, 2003: 18 R&D labs in China
PRC Gov’t, 2005: 700+ R&D centers in China
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Rise of Foreign R&D Labs in China
# of R&D labs / year
22
20
18
16
14
12
10
8
6
4
2
‘87 ‘88 ‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03
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STS (2003) and own research
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Foreign R&D Location in China
• Development in Shanghai
• Historic reasons (also, more expats)
• Close to customers & production
• Fast-paced
• Central location
1
1
78
8
• Research in Beijing
• Standardization and
decision-making bodies
• > 100 universities
4
1
2
9
1
1
9
• Cluster vs. crowding-out effects
61
5
• But: Decision to be made case by case: account for industry and R&D
focus (e.g., Pharma, TCM  Shanghai; IT, Genetics  Beijing)
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Zedtwitz (2004): R&D in China. R&D Mgt
Ch-11
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China’s Agenda for S&T: IPR Management
• Traditional attitude to art and craftsmanship promoted copying of old masters
• “To Steal a Book is an Elegant Offense”
• Useful for diffusion of technology, but not necessarily for invention
• Although China has been home to a large number of important inventions, few
were protected by any legal institutions (such as IPR)
• The current record of IPR in China shows weak incentives for invention
Assessment
• Problem is mostly with respect to IPR enforcement, not law
• Foreign MNCs are considering to retreat cutting-edge technologies and
investments unless IPR situation improves
• As some Chinese companies develop into technology companies they too will be
unable to reap the benefits of their work
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Domestic and Foreign Patent Applications in China
300000
70000
Domestic Total
60000
Foreign Total
Total Patent Applications
Domestic Invention
200000
50000
Foreign Invention
40000
150000
30000
100000
Invention Patent Applications
250000
20000
50000
10000
0
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99
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00
20
01
20
02
20
03
20
04
0
Year
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Ref: Hu and Jefferson (2005)
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Increasing Number of Patent Applications
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China’s Agenda for S&T: Building Competitiveness
• The origins and mainstay of Western multinationals lie in their ability to develop
unique technological capabilities (eg, Microsoft, Merck, Shell, Siemens, etc.)
• International success is tied to innovative capacity and the ability to stay abreast of
latest technology (R&D, NPD)
Assessment
• Western and Japanese firms have built up international innovation organizations
around a core R&D center
• Only a handful of Chinese companies have started to do so
• Main limitations:
• Lack of international experience: no global managers, lack of English
• Lack of R&D experience: no R&D expertise, no R&D currency
• No cost advantages abroad: int’l R&D comparatively expensive
• Most companies still young and small: focus on short-term, not R&D
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Strong R&D  Basis for International Competitiveness
Why a Chinese firm would internationalize R&D:
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Access to local technology and market intelligence
Hiring foreign experts
Developing a global image
Supporting local sales
Example Haier:
• R&D in Qingdao, Beijing, Guizhou
• R&D in Hong Kong (SAR), London, Silicon Valley, Sydney
• #5 white-goods company worldwide
• Competes & cooperates with companies like Siemens, Whirlpool, GE
 A necessary (for some) but painful process!
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Chinese R&D, Globally Dispersed
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Zedtwitz (2005): R&D from Developing Countries. UNCTAD
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Questions?
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Recent References
• von Zedtwitz, M. (2004): Managing Foreign R&D Labs in China. R&D Management, Vol.
34, No. 4, 439-452.
• von Zedtwitz, M. (2006): Connecting Science to Innovation: Managing R&D on a Global
Scale. Edgar Elgar: Cheltenham.
• Gassmann, O.; von Zedtwitz, M. (2003): Trends and Determinants of Managing Virtual
R&D Teams. R&D Management, Vol. 33, No. 3, 243-262.
• von Zedtwitz, M.; Gassmann, O. (2002): Market versus Technology Drive in R&D
Internationalization: Four different patterns of managing research and development.
Research Policy, 31, 4, 569-588.
• von Zedtwitz, M. (2003): Initial Directors of International R&D Laboratories. R&D
Management, Vol. 33, No. 4, 377-393.
• Fischer, W.A.; von Zedtwitz, M. (2004): Chinese R&D: Naissance, Renaissance, or
Mirage? R&D Management, Vol. 34, No. 4, 349-365.
• Boutellier, R.; Gassmann, O.; von Zedtwitz, M. (2006): Managing Global Innovation Uncovering the Secrets of Future Competitiveness. 3rd ed. Springer: Heidelberg
© Max von Zedtwitz, [email protected]
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