The inaugural (March 2008) issue of PRISM, an undergraduate journal published by the University Scholars Programme (USP) of the National University of Singapore (NUS), carries a dozen essays. Six were written by Stanford undergraduates for a Stanford Overseas Seminar taught in Singapore in September 2006, and six by NUS undergrads in the USP for an NUS course taught at Stanford in May 2007.

The Stanford students, their paper topics, and brief summaries of their conclusions follow:

Jenni Romanek examined Singapore’s national identity. She found that Singaporeans “embody certain shared attributes of national identity, but they do so on a superficial level … If the government truly wishes to impart upon citizens a Singaporean identity, it must allow them to cultivate and define it, at least in part, by themselves. This necessitates a level of self-expression that is not currently acceptable by government standards.” She ended her essay by asking, “Without free speech, whose identity are Singaporeans representing?”

François Jean-Baptiste examined Singapore’s efforts to inculcate national identity through the school curriculum. He found the education ministry’s top-down methods “generally unsuccessful” and recommended a more student-and-teacher-driven approach. “The real and representative Singapore narrative,” he wrote, involved the ambitions of a wide range of Asian immigrants including “Filipina maids,” “Malay Muslims,” and “opposition leaders like J.B. Jeyaretnam and Slyvia Lim.” Education in the city-state’s secondary schools, he concluded, “should and can incorporate that story.”

Lauren Peate studied the “Four Million Smiles” campaign launched in the run-up to the annual meetings of the International Monetary Fund and the World Bank held in Singapore in September 2006 while the Stanford seminar was in progress. She found general public support for the campaign except among “young, [more] educated, and electronically connected” Singaporeans, one of whom told her, “We trust the government but it doesn’t trust us [to smile without being told to].” She ended by wondering how the authorities would choose to deal with a young generation of bloggers with critical minds.

Jon Casto explored Singapore’s efforts to instill an entrepreneurial culture despite a general aversion to risk (and a preference for state employment) “perpetuated through cultural norms, the labor market and [government-linked corporations].” He also, however, found entrepreneurship in Singapore “slowly on the rise” and argued that “today’s experiences” in promoting it “may bear tremendous fruit” if and when the economic climate because problematic enough to demand “that Singaporean individuals, not just the [People’s Action Party] government, provide solutions.”

Alexander Slaski researched the implications of illiberal politics for environmental policy in Singapore. He credited the government with having provided its citizens with a high quality of life, including “excellent environmental governance” from the top down. But he was struck by an artifact of the government’s relatively authoritarian approach to being green: the virtual absence in the city-state of a bottom-up or civil-society movement for conservation. To that extent, he concluded, “the authoritarian elements of the government have kept environmental protection from being as strong as it could be.”

Sam Shrank investigated the status and future of renewable energy. Singapore had previously managed to secure for itself “a constant and assured flow of oil and natural gas from abroad at reasonable.” But “peak oil—the year in which the supply of oil peaks—is in sight, and the end of natural gas is not far behind.” Oil and gas prices, he warned, will rise as demand outpaces supply. Amply sunlit as it is, Singapore could and should be doing much more to exploit sources of renewable energy sources, and solar (photovoltaic) energy in particular.

Compared with these essays, the Singaporean students’ essays in PRISM were no less diverse. If the Americans concentrated single-mindedly on Singapore, in keeping with the focus of the Stanford seminar, the Singaporean contributors were more inclined to compare American conditions and experiences with those in their own country.

Dan Goh, the NUS professor who taught the Singaporeans at Stanford, introduced the student essays. His thoughts are excerpted here:

"Reflections on Western civilization have often found themselves seduced by the idea of the American exception. … It seems ironic therefore that a group of American students would travel to this island to study what they have termed as the Singapore exception. Seen in the immediate context of Southeast Asia, Singapore is indeed an exception [whose] culturally diverse [im]migrants [have transformed the city-state] into a forward-looking nation. With little historical gravitas except for founding moments and fathers, it is a young nation filled with anxieties and self-doubt. Yet, it is resolute in forming its citizenry through clever ideological campaigns and in engineering visionary technological and economic projects based on successful foreign examples. For all its democratic institutions, it is beset by political elitism and illiberal tendencies. Despite its Edenic ideals and scientific prowess, it is reluctant to pursue environmental sustainability. These are the themes and contradictions tackled in the articles by the six young American scholars featured in this inaugural volume."

"But if we look closer, these themes and contradictions describe America as well. I have always suspected that the study of the exceptional other is always the study of our self as normal when the two are actually much more similar than they are different. Irony has a way of turning in on itself. However, the American students’ essays show that there is a major difference at the heart of comparing the American and Singapore exceptions."

"Given the American political culture of suspicion of state authority, it is not surprising that [in the Stanford students’ essays] the state sticks out visibly in the landscape of Singapore society. For the Singaporean students traveling to the Bay Area however, the feeling is best described by the excitement and trepidation of a Western naturalist traveling from sedate urban London to the rich jungles of Borneo. The state monolith fades and vibrant cultural diversities, intriguing identity evolutions and self-organizing chaos beckon. But always with Singapore in their minds, the young scholars reflected their study of Silicon Valley and San Francisco back unto Singapore. What they found was that the same diversities, evolutions and chaos were also evident in Singapore, but with the roots of the state apparatus sunk deeper into the rich soil here."

"Singapore is not anything like America and yet is everything American, except for the leviathan that stands over our shoulders. Nonetheless, the diversities and hybridities of vernacular everyday life continue to grow as ideas, images and identities speed around the global circuits of capitalism, … connecting young people across the deep Pacific …"

In his own preface to the PRISM issue, SEAF Director Donald Emmerson, who taught the Stanford seminar in Singapore, had this to say:

“In Praise of Bad Teaching.” Years ago at the University of Wisconsin-Madison I pinned a page of text under that title to a bulletin board next to my office door. The author argued that bad teachers were really good teachers because their boring lectures drove their students out of the classroom and into the real world where real learning could occur.

The argument is not wholly facetious. Conventional undergraduate education is notoriously indirect. Independent field work is the preserve of professors and graduate students. Undergraduates sit, listen, read, take notes, and take exams. Technology—the ability to google—has reduced the teacher’s ability to control information. But in standard classrooms, it is still the teacher who selects, interprets, and conveys knowledge, and who then tests and grades its retention. In humdrum pedagogy at its worst, the professor and the student are, respectively, faucet and sponge. A charismatic lecturer—a supposedly “good” teacher—may fill lecture hall seats only to reinforce the enthralled passivity of the sitters.

Fortunately, the National University of Singapore and Stanford University are not conventional institutions. Both campuses encourage their students to go abroad. Professors are not dispensed with. But by affording students direct contact with foreign cultures, NUS and Stanford necessarily challenge the teacher’s span of control. In that loss of unquestioned professorial authority lies a chance for serious learning by students and teacher alike. …

For lack of space, alas, we could not [publish in PRISM] all thirty essays written for our seminars. But those that are printed herein should give readers a feel for what happened when two sets of undergraduate students were “turned loose” on each other’s turf. I am grateful to [Dan Goh and the other individuals who made this issue and the seminars possible] and above all to both complements of students, including those not represented in these pages, for giving me one of the most enjoyable and memorable “teaching”—that is to say, learning—experiences of my life.

PRISM is not available on line, but it can be ordered (stock permitting) from

The Editor, PRISM
University Scholars Programme
National University of Singapore
BLK ADM, Level 6,
10 Kent Ridge Crtescent
Singapore 119260

Dr. Alejandro Toledo, former president of Peru, describes his vision as “democracy that delivers.”

“My colleagues and I who have taken the challenge of public life as a vocation and a life commitment,” Toledo says, “cannot but feel concerned about the great challenges faced by our continent where half its population lives between poverty and misery and where inequalities and social exclusion are at their highest.” Toledo has spent the past academic year in residence at the Center on Democracy, Development, and the Rule of Law, applying theoretical rigor to a bold new plan for Latin America and also making a sweeping call to action. At the same time, as Distinguished Visiting Payne Lecturer for the Freeman Spogli Institute, Toledo has shared his vision and his plans for the future with the Stanford community in a three-part special Payne Lecture Series, titled “Can the Poor Afford Democracy? A Presidential Perspective.”

Forty percent of Latin Americans — 230 million people — are trying to survive on less than $2 a day, and 110 million live on less than $1 a day, Toledo is quick to point out. He also notes that income levels do not reflect the “drama of poverty”— things like infant mortality, malnutrition, lack of access to health care and education, and ethnically based social exclusion. Impoverished populations see corruption, exclusion, and economic inequality, and they begin to associate these things with democracy and become impatient with it. Toledo is calling for leaders to have the courage to invest in human development through nutrition, education, and microfinance programs and to make decisions that may not have short-term political benefits. “This is a moment for more leadership and less politics,” he said in January.

With the Global Center for Development and Democracy, the non-governmental organization that he founded, Toledo is organizing a new, broad-sweeping initiative to construct a social agenda for democracy in Latin America for the next 20 years. This Social Agenda for Democracy Initiative will identify specific and measurable goals to demonstrate that democracy is capable of “delivering concrete results to the poor.” To do this, Toledo says, the group of former Latin American presidents, democratic leaders, experts, and exponents of civil society that he is organizing will need to map out an agenda for both stimulating economic growth and reducing inequality and exclusion. Their agenda will be supported by parallel and ongoing efforts to promote and strengthen democratic institutions including judicial systems, freedom of speech, human rights, and the independence of all branches of government.

Toledo’s working group met for the first time on November 26, 2007, at the National Endowment of Democracy in Washington, D.C. The core team is made up of 12 former presidents, including Presidents Vicente Fox (Mexico), Fernando H. Cardoso (Brazil), Carlos Mesa (Bolivia), Ricardo Lagos (Chile), Cesar Gaviria (Colombia), Jose Maria Aznar (Spain), Rodrigo Carazo (Costa Rica), and Ricardo Maduro (Honduras). The group met again in Lima, Peru, on April 25, a meeting that Toledo is particularly excited about. “Our meeting in Lima has special significance for the initiative,” Toledo explains. “First, because the Latin American, Caribbean, and European Union Summit between 60 heads of state was held this year in Lima, just one month later, and second, because the theme of this year’s summit is ‘Poverty, Inequality, and Exclusion.’”

Which is the task that lies before Toledo and his colleagues.

One of the main aims of the Social Agenda for Democracy Initiative is to develop a social matrix to measure progress on key indicators such as economic growth, health, education, employment and salaries, poverty and income distribution, and access to technology. Several working group members reported on May 14 to the Latin American, Caribbean, and European Union Summit on the Social Agenda for Democracy Initiative and their progress in constructing this social matrix — giving the bold plan of this already super-charged group additional visibility and opportunity for capacity building. The group will meet two more times in 2008: in Bolivia this July and again in September in Sao Paulo, Brazil.

For Toledo, the link between democracy and social change is palpable — he is both the product of and an advocate for the transformative powers of these two processes. Democratically elected in 2001, Toledo was Peru’s first president of indigenous descent, having grown up in an impoverished and remote Andean village. “For 500 years, someone with my ethnic background was never accepted to be a candidate,” Toledo said in May, in his final Payne lecture. “I was a political intruder in the establishment of politics in Latin America and in Peru.”

In his five-year term as president, Toledo achieved 6 percent average annual growth, increased foreign direct investment by 50 percent, balanced the budget, and brought 25 percent of the population above the poverty line. He also initiated a program called Juntos, or “Together,” a system of conditional, direct cash transfers to female heads of the poorest households. In return for obtaining pre- and post-natal checkups, vaccinating their children, and making sure their children went to school, the women received $30 per month to invest in their economic self-sufficiency. The short-term solution provided by Juntos was initially criticized by the IMF but has been so successful that it is now being evaluated as a policy option by both the IMF and the World Bank and has been continued by the current government.

In his first Payne lecture, held in January, Toledo interwove firsthand observations with quantitative research to support his argument that a reduction in poverty and inequality does not necessarily follow economic growth. While he has “cautious optimism” that Latin America is poised to “make a substantial jump and take a prominent place in the world economy in the next 15 to 20 years,” he said that only an ambitious social agenda to reduce poverty and inequality will stimulate economic growth, strengthen democratic institutions, and consolidate democratic governance in the region.

Having analyzed the relationship between democratic reform, economic growth, and poverty, inequality, and social exclusion in Latin America, Toledo focused his second Payne lecture, in April, on some of the political dynamics in Peru leading up to his election to president. His multimedia presentation included footage of the mass protests that followed Alberto Fujimori’s controversial re-election to a third term in 2000 amid allegations of electoral fraud. Fujimori ultimately agreed to schedule a new election the following year and stepped down as a candidate.

In his third and final Payne lecture, on May 14, Toledo answered the question that served as the organizing principle for the series: Can the poor afford democracy? Yes, he said — but more importantly, “Democracy cannot afford to neglect the poor.”

Like Toledo, former president of Mexico and Social Agenda for Democracy colleague Vicente Fox sees positive economic and social growth for Latin America. He accepted Toledo’s invitation to visit the Stanford community and on March 5 spoke with intensity about Latin America’s prospects for both social welfare and economic well-being in the coming century. Mexico, which Goldman Sachs recently projected to be the world’s fifth largest economy by 2040, was emblematic of this electrifying future, he said. On the one hand, there is great promise for economic growth, stability, and entrepreneurship; and with this great promise, he was careful to note, comes great responsibility for the reduction of poverty and inequality through a “package of powerful social policies.”

Looking ahead, Fox hoped that Latin American democracy would not to be taken for granted; “it has to be nourished, it has to be taken care of, it has to be promoted.” But his outlook for Latin America is that this is a time for its countries to consolidate democracies and freedoms, consolidate economies, and promote new leadership. After years of military dictatorships, corruption, inefficiency, and poor development, “People decided to go for change,” Fox said, “and change is a magic word. It moves people to action.”

Just look at the number of construction cranes around you and you’ll immediately know that you have landed in a petrostate. What’s special about the Caspian oil giant Kazakhstan is the fact that there are two types of cranes—the idle ones and the busy ones. This becomes nowhere more apparent than in the country’s new capital Astana. The idle cranes stand on private construction sites and the busy ones on public construction sites.

Kazakhstan is probably one of the countries worst hit by the global credit crunch. After years of aggressive borrowing on international markets Kazakh banks have had to pull the plug on many domestic projects after their own cash stream evaporated and it became clear that they would need to settle most of the $14 billion in scheduled principal repayments on external debt this year. The International Monetary Fund (IMF) had been warning about the unsustainability of the ever growing debt ratio for the past two years, but to little avail. Growth rates above 9 percent for the past seven years and great future prospects thanks to ever expanding oil production earned Kazakhstan a credit rating of “stable” from Standard & Poor's rating agency. Now, the bubble burst, the S&P rating turned “negative”, and the private cranes stopped.

The busy cranes—in contrast—run 24/7. No effort is spared to make sure that the fancy new government building, the pavement, the flower-adorned square will be finished in time for the highlight of the year: the birthday of both the President Nursultan Nazarbayev and the capital on July 6 (their 68^th and 10^th, respectively). This simultaneity is no coincident. Astana is largely Nazarbayev’s creation. It was him who anointed the city in the middle-of-nowhere the new capital of the young Republic, who chose its no-nonsense name (“Astana” literally means “capital”), and who caused its population to triple. The upcoming celebrations almost turned into a Nursultan & Nursultan party. If Mr. Sat Tokpakbaye and his fellow parliamentarians had gotten their way, the capital would yet again have undergone a name change—this time to honor its creator more explicitly by endowing it with the President’s first name (there is already an oil field named after him). But out in his modesty, the President declined. With his proposal Mr. Tokpakbayev, achieved the near-impossible: to distinguish himself by loyalty in a Parliament whose members all come from the same Nur-Otan party.

The idle and the busy cranes both stand for different answers to petrostates’ most burning policy question—how to best use the ballooning governmental revenues from the thriving oil and gas sector. Save or spend?—is the 500 billion dollar question (to take the value OPEC earned from net oil export in 2007). Kazakhstan, like 23 other oil and gas producing countries, followed the IMF’s advice and established an oil fund with the goal of sterilizing, stabilizing, and saving governmental oil revenues. The so-called National Fund of the Republic of Kazakhstan (NFRK) has accumulated more than $26 billion in the eight years since inception, and the total value of all oil-related funds around the world is estimated to surpass the astronomical sum of $2.300 trillion. While the theoretical logic underlying the creation of oil funds is compelling, their actual track record in achieving macroeconomic stability and fair intergenerational income distribution is more mixed. As a number of recent studies demonstrate (e.g. Shabsigh and Ilahi 2007; Usui 2007), oil funds are no substitute for the strengthening of all institutions involved in the revenue management and budgeting process. Strong expenditure and deficit control mechanisms are indispensable because such richly endowed funds make it easier for the government to borrow money on international financial markets whereby the fund acts--explicitly or implicitly—as a collateral, which in turn undermines the fiscal prudence that the fund was meant to ensure in the first place. More indirectly, the accumulation of large sums of money creates a moral hazard problem also with respect to private sector spending. The temptation is huge for private (and state-owned) companies to take overly risky decisions in the hope that the oil fund will bail them out in case their speculations turn sour. When oil fund assets correspond to more than a quarter of the country’s GDP—as it is the case in Kazakhstan—this temptation is hard to resist. Recent demands by Kazakh banks to dip into the NFRK for alleviating their liquidity problems provide just one case in point, and the national oil company KazMunaiGas may soon follow suit.

However, spending, rather than saving, does not provide a panacea either and is fraught with its very own set of problems.

First, governments of oil rich countries faces a challenge similar to that of rich parents who want to raise their children to become productive members of society. As the US billionaire investor Warren Buffet was once quoted saying: “a very rich person should leave his kids enough to do anything but not enough to do nothing.” Political scientists refer to this concern as the risk of a growing “rentier mentality” (Beblawi 1990), i.e. the tendency of citizens in petrostates to expect the government to solve all their problems rather than relying on their own initiative. The resulting societal dependency may actually suit governments very well since who will bite the hand that feeds him/her? Innovation and entrepreneurship are undermined and undemocratic structures perpetuated. Second, pro-cyclical spending of highly volatile oil revenues results in a series of negative macroeconomic consequences ranging from soaring inflation, exchange rate appreciation, and a further accentuation of the crowding-out of private investments. Finally, a massive explosion in government revenues (e.g. the newly introduced oil export tariff alone is expected to add another $1.5 billion per year) makes it close to impossible for the governmental apparatus to identify and supervise a sufficient number of new spending projects with a satisfactory social return. The floodgates are wide open to white elephant projects, mismanagement, and corruption.

The Kazakh government is acutely aware of this dilemma. Like all other oil producing nations around the world, Kazakhstan is desperately trying to navigate safely between Scylla (saving) and Charybdis (saving). As a possible solution to this dilemma a number of scholars and activists are now proposing the direct distribution of oil revenues to all citizens (and thus the ultimate owners of a country’s natural resource endowment), thereby empowering them to decide for themselves how they want to spend the monetized share of their subsoil assets.

The only real world examples of direct distribution arrangements can be found in the US state Alaska and the Canadian province Alberta. This option has also been proposed for Nigeria (Sala-i-Martin and Subramanian 2003), Iraq (Birdsall and Subramanian 2003; Palley 2003; Sandbu 2006), and Kazakhstan (Makmutova 2008).

While direct distribution arrangements may mitigate some of the problems highlighted above, they have to be greeted with some degree of caution. High levels of corruption and patronage-driven politics not only undermine the effectiveness of top-down development projects but can also jeopardize the fair distribution of oil revenues. Furthermore, even if every entitled citizen does receive his or her share of oil revenues, the long-term impact on a country’s economic development may be small or possibly even negative because of increased inflation and spending on unproductive goods and services imported from abroad. These considerations are not of particular relevance in the two existing examples of direct distribution of oil revenues. Alaska and Alberta both enjoy a relatively good record in fighting corruption and in observing the rule of law. They are both part of a larger, highly developed economy which helps to mitigate inflationary pressure and the risk that citizens will spend most of their additional income on goods imported from abroad. But the picture looks very different in most other oil dependent countries.

One possibility for addressing the risk that directly distributed oil revenues will be spent unproductively is to combine the direct distribution scheme with certain conditions that are intended to encourage citizens to invest in ways that boost their own productivity. This approach has so far not been discussed in academic or policy circles, but the conditional distribution of oil revenues (CDOR) offers the potentials of marrying the merits of two programs that are generally considered to be successful, namely the direct distribution of oil revenues and conditional cash transfer programs employed throughout the world to fight poverty in a more targeted and bottom-up fashion. A whole range of different design options are compatible with this overarching concept. CDOR schemes do not have to adopt the exclusive pro-poor focus of conditional cash transfer programs. In fact, both in Alaska and in Alberta oil revenues are deliberately distributed in an income-blind manner, staying true to the logic that citizens are entitled to a share of oil revenues in their capacity as the ultimate owners of these resources. Also in contrast to most existing conditional cash transfer programs (e.g. Oportunidades in Mexico), the conditions attached to the direct distribution of oil revenues would probably be primarily linked to the use of these revenues rather than some pre-qualifying behavior (e.g. taking infants to regular health check-ups). Eligible spending areas would be selected based on their potential to maximize productivity gains and could include education, health, energy efficiency, start-up capital for small enterprises. Additional design options worth examining include the saving and pooling of CDOR money, which would allow citizens to realize a medium to larger scale common project within the approved spending priorities. For instance, the most promising strategy for greater productivity in Kazakhstan’s agricultural sector lies in the creation of larger units (co-operatives, publicly traded agricultural complexes), and specific incentives may therefore be built into the CDOR scheme to promote such a move away from subsistence farming.

The conditional distribution of oil revenues under any of these design options presents a promising discussion platform for a new initiative the World Bank announced in April 2008—tentatively labeled EITI++. This initiative is meant to help resource rich countries to “manage and transform their natural resource wealth into long-term economic growth that spreads the benefits more fairly among their people”, by focusing not only on the transfer of oil revenues from companies to governments (as does the “original” Extractive Industry Transparency Initiative (EITI) of 2002) but also on the generation, management, and distribution of oil revenues. The transparency mechanism of double disclosure pioneered by EITI could thereby be used to ensure that all citizens receive the share of oil revenues they are entitled to. Transparency could be further enhanced by tools currently developed by the Google Foundation’s Inform & Empower program.

The implementation of the CDOR scheme could build directly upon the experience gained under conditional cash transfer schemes, including the scientific testing of its effectiveness in a randomized experiment setting. The bottom-up development philosophy underlying the conditional distribution of oil revenues ties nicely in with other approaches to strengthen the consumers of public goods and services that have gained currency over the past decade (e.g. vouchers for health and education services).

With this sketch of a conditional distribution of oil revenues scheme in my pocket (and and unconditional love for the kicking baby in my belly) I navigated my way through yet another construction site to see Mr. Kuandyk Bishimbayev, one of Kazakhstan’s young and rising stars (now the head of the so-called “Division of Socio-Economic Monitoring” within the Presidential Administration). During our meeting I got the impression that my enthusiasm for this novel approach to oil revenue management proved contagious, and since my return to Stanford I have rolled out my networking machinery to spread the virus among my academic colleagues. The time is certainly ripe. With oil prices set to remain high for the foreseeable future Kazakhstan and all other petrostates cannot afford to miss this historic opportunity to promote the diversification of their economies and to create the foundation for a future where oil may lose its dominant position to alternative sources of energy.

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.

Business, government, and academic communities increasingly recognize the role that entrepreneurship and innovation play in addressing some of the world’s most complex problems. At Stanford, the new Hasso Plattner Institute of Design, also known as the d.school, takes innovative design approaches beyond the traditional disciplines of product and industrial design. There, students and faculty use design thinking to tackle difficult problems that demand interdisciplinary solutions. Research projects and classes range from building better elementary schools to enabling farmers to step out of poverty to changing how small businesses innovate.

Design thinking, a methodology that grew out of the Design Division at the School of Engineering at Stanford, has been refined over the years through programs such as Engineering 310, “Team Based Design Innovation with Corporate Partners.” At the core of Design thinking lie 1) a human-centered approach to finding solutions, 2) a strong collaborative culture that brings together multidisciplinary teams and encourages diverse perspectives, and 3) a continuous prototyping process.

In April 2007, Professor Larry Leifer, director of the Stanford Center for Design Research (CDR) and a member of the d.school, together with Philipp Skogstad, executive director of E 310, visited the Pontificia Universidad Javeriana (PUJ) in Cali, Colombia. During the three-day visit, sponsored and facilitated by IOP, the Stanford University International Outreach Program (http://iop.stanford.edu/), the Stanford delegation negotiated a detailed plan to engage two teams of 5th-year students at PUJ with two Stanford master level teams on a corporate project in the E 310 program. Professors Larry Leifer and Mark Cutkosky will co-lead this nine-month international collaboration, which will start in fall 2007 and will include regular videoconferences, online collaboration, and short-term visits.

The goals of this collaboration are twofold. 1) Students and instructors at PUJ and Stanford will have an opportunity to learn from each other as they participate in E 310. For Stanford participants, it will be the first time to have a South American perspective represented in the globally distributed E 310 program. For PUJ participants, it will be an opportunity to learn more about design thinking as the university develops its own design program, allowing them to strengthen the connection between the university and industry, a bridge that traditionally has been weak across South America. 2) Both universities will be able to build upon the E 310 opportunity and apply the design thinking approach to other socially and economically useful innovations, with a particular emphasis on global challenges that have a strong impact on developing countries.

The collaboration between PUJ and Stanford is well matched with IOP’s goal of promoting new multidisciplinary curriculums that address global challenges, introduce innovative learning and teaching approaches, and take advantage of appropriate uses of information and communication technologies.

Venture capitalist, attorney and educator Michael Korver opened SPRIE's spring seminar series on new post-bubble patterns of entrepreneurship in Japan. Korver, a managing partner in Japan's Global Venture Capital, spoke on how he has seen venture capital evolve there in light of his own firm's experiences.

Korver argued that despite a number of problems surrounding the venture capital situation in Japan--a surplus of capital overwhelmingly from large entities in the financial services sector, low perceptions of entrepreneurial activity, and a lack of "high growth expectation" entrepreneurial activity--Tokyo offers a number of advantages to entrepreneurs, perhaps the most significant being Japan's early-adopter, high-consumption domestic market.

"Tokyo is... the perfect incubator for new businesses, ...but the Japanese leaders do not understand that the future of Japan... is absolutely dependent on creating entrepreneurial innovation."
-Michael Korver

He conceded that things have gotten worse since 2006: the backlash from the Livedoor/Takafumi Horie scandal and the resulting drop in the stock market, a 20% withholding tax on investment in Japan from foreign sources and the Ministry of Finance's regulation of industries that use limited partnerships like the venture capital industry have all added up to a drying-up of VC investments and a drop in IPOs in Japan.

Nonetheless, Korver will continue to have Tokyo as his base of operations. "Tokyo is... the perfect incubator for new businesses, ...but the Japanese leaders do not understand that the future of Japan... is absolutely dependent on creating entrepreneurial innovation."