A new era is under way for global high-technology
innovation and entrepreneurship, marked by the rise of
Greater China. During the past several decades, Taiwan,
Singapore, and others have developed as centers in key
information communications technology (ICT) industries.
More recently, from Beijing to the Pearl River Delta,
markets for new products are expanding, competencies
in new technologies are growing, and a new generation
of high-technology regions is emerging. All these signs
point toward China as a rising powerhouse, accelerating
the shift of locus for the global high-technology arena
across the Pacific.
The contours of the nature and pace of this change
are already evident in some ICT industries but have yet
to be fully analyzed. The Stanford Program on Regions of Innovation and Entrepreneurship (SPRIE) (SPRIE) is leading
a research program to advance the understanding of the
dynamic systems of innovation and entrepreneurship
that drive China’s ascendance in high technology and
its implications for the global knowledge economy.
CHINA'S QUEST FOR INDEPENDENT INNOVATION
No longer satisfied with China’s role as the world’s
factory, Chinese government leaders have declared
that zizhu chuangxin (“homegrown” innovation) is the
watchword for the future. They are sounding an urgent
call to reduce dependence on foreign technology and
build China into an “innovation-driven economy.” As
President Hu Jintao said, “homegrown innovation” is
the “core of national competitiveness”— the path to
sustainable economic prosperity and global leadership.
Last May, SPRIE co-sponsored Greater China's Innovative Capacities: Progress and Challenges, a two-day,
invitation-only workshop at Tsinghua University in
Beijing that attracted scholars from Europe, the U.S., and
Asia, as well as Chinese industry leaders and government
policymakers. More than 70 participants tackled topics
such as indicators of innovative capacity (patent data
and journal citations, for example), reforms of Chinese
research institutions to spur commercially useful innovation,
and the changing roles for innovation of the state,
multinational corporations (MNCs), and domestic firms.
A few numbers illustrate China’s progress over the
past decade. Total R&D spending nearly tripled, reaching
1.3 percent of GDP in 2005, even while GDP doubled.
China is now ranked third worldwide in overall R&D
spending (after the U.S. and Japan), with targets to
increase spending to 2 percent of GDP by 2010. Science
and engineering PhDs more than doubled between 1996
and 2005. And China’s growth rate of U.S. patents
granted has eclipsed Japan, Taiwan, or Korea, with an
even steeper trajectory in Chinese-authored science and
technical publications in international journals.
Yet, according to SPRIE Co-Director Henry S. Rowen,
“the highest value-added work in China still is done
largely in foreign-invested companies and increasingly
in firms led by returnees who have been educated and
worked abroad. Currently most R&D is focused on
incremental improvements of existing products and
services. Nevertheless, the key building blocks are in
place for increasing technology contributions.” At MNC
R&D centers like Nokia and Microsoft, top Chinese
teams are beginning to contribute to worldwide product
design and research. Through interviews at more than
75 firms in Beijing and Shanghai, SPRIE researchers
have identified emerging competencies at some of the
best domestic research labs and companies, ranging from
multimedia chip design to communication equipment.
Huawei, the telecommunications networking giant
with 2005 revenues of $5.9 billion, reports consistently
spending more than 10 percent of sales on R&D.
Boasting more than 10,000 researchers in China plus
R&D centers in Bangalore, Silicon Valley, Dallas,
Stockholm, and Moscow and 3,600 patent applications
in 2005, the company epitomizes China’s growing
pursuit of low-cost innovation, not just low-cost manufacturing
and services.
However, obstacles to China’s drive for innovation
are not trivial. Many Chinese institutions, though
improving, still fail to provide an environment conducive
for innovation, including a competitive and open system
for R&D funding or effective intellectual property
protection. As SPRIE associate director Marguerite
Gong Hancock observes, “The current gold rush mentality
for quick profits runs counter to breakthrough
technology innovation that is typically the result of
patient investments in research with long-term and
uncertain payoffs. To date, some of the most innovative
bright spots are not in disruptive technologies but in
processes, services, and business models.”
One notable obstacle confronting Chinese high-tech
firms is a leadership talent shortage, a problem that is
the focus of another SPRIE research initiative.
HIGH-TECHNOLOGY LEADERSHIP IN GREATER CHINA
Since 1999, founders have led 24 Chinese firms to IPOs
on NASDAQ. From this unprecedented number of
startups to a rising class of billion-dollar giants going
global, high-tech companies in China have a dramatically
intensifying need for leadership.
To examine how China’s high-tech executives are
facing this challenge, SPRIE partnered with Heidrick &
Struggles, a leading executive search firm, to conduct
more than 100 interviews with executives at both
domestic and multinational high-tech firms operating
in China.
Leaders face what Nick Yang (MS ’99), founder of
wireless service provider KongZhong, described as
“uncharted waters.” They must create a cadre of top
leaders and managers in the face of an acute shortage
of seasoned managers and globally capable executives.
As John Deng, founder and CEO of Vimicro (a fabless
semiconductor company with $396 million market
cap), said, “I don’t lack other things, such as funding,
infrastructure, or government relations. What I lack
now is people.”
SPRIE Co-Director William F. Miller commented,
“Interestingly, not one interviewee expressed an intention
to adopt a management model that diverges significantly
from the dominant global model,” a model defined by
competencies well documented as key among U.S. and
European executives. Based on the SPRIE-Heidrick
study, some of these competencies currently are both
more critical and more difficult to find in China: the
ability to drive results, achieve customer orientation,
provide visionary leadership, create organizational
buy-in, model key values, and delegate and empower.
The best leaders not only are seeking these competencies
in senior executives but also cascading these attributes
throughout their organizations.
The impact ripples throughout the talent pipeline,
from recruiting to retaining to developing key people.
High-tech leaders in China are deploying a wide range
of new tactics. Miller noted, “To address pressing leadership
shortages, executives are devoting an unusually
large amount of their time and attention to talent and
human resource issues.” As Mary Ma, CFO of computer
giant Lenovo, stated, “I have become an HR manager.
I spend 30 percent of my time on people and succession
issues.” And the best companies are systematically
using their best leaders to mentor and mold the next
generation of professionals—the mid-level managers
and team leaders, who are mobile, scarce, and frequently
lack the full set of skills needed to drive results.
Emerging trends in leadership among China’s hightech
executives may be a good harbinger, pointing to
how and where this influential generation of China’s
high-tech leaders are steering their firms—firms that
have been charged with the task of leading China’s
future economic growth.
