Stanford University

The rise of China: changing patterns of global innovation and entrepreneurship

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Marguerite Gong Hancock
George Krompacky
George Krompacky
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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.

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The Political Economy of Successful Reform: Asian Stratagems

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Major economic reforms are often politically difficult, causing pain to voters and provoking unrest. They may be opposed by politicians with short time horizons. They may collide with the established ideology and an entrenched ruling party. They may be resisted by bureaucrats and by vested interests. Obstacles to major economic reform can be daunting in democratic and autocratic polities alike.

And yet, somehow, past leaders of today's Asian dragons did implement vital economic reforms. The paper recounts the political maneuvers used by leaders of economic reform in Asia during these pivotal eras: China under Deng Xiaoping; India in the 1990s; Thailand under General Prem Tinsulanonda; Vietnam's Doi Moi; South Korea under Park Chung Hee; and Singapore under Lee Kuan Yew.

The last part of the paper classifies these maneuvers as responses to the main political barriers to reform. It serves as a "playbook" of tactics for economic reformers. For example, to overcome ideological baggage, the reformers packaged reforms as means to strengthen the party in power. They reformed gradually, initially seeking win-win compromises. They blessed pro-market violations as pilot projects. They even created new provinces to dilute the anti-reform vote.

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Stanford Center for International Development
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Dennis Arroyo
Dennis Arroyo

The Foxy Art of Herding Dragons: How Sly Asian Leaders Pulled off Politically Difficult Economic Reforms

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Major economic reforms are often politically difficult.  They may cause pain to voters and provoke unrest.  They may be opposed by politicians whose time horizons are shortened by electoral cycles.  They may collide with the established ideology and long-standing practices of an entrenched ruling party.  They may be resisted by bureaucrats who fear change, and by vested interests with stakes in the status quo.  Obstacles to major economic reform can be daunting in democratic and autocratic polities alike. 

And yet, somehow, past leaders of today's Asian dragons did manage to get away with critical and creative economic reforms.  Sly political foxes nudged their countries onto high-growth paths toward global renown as economic dragons.  What lessons can be learned from their experiences?  Are tactics that worked in authoritarian systems applicable to democratic ones, and vice versa?  Can one identify a set of stratagems that would amount to an equivalent, for economic reformers, of the advice Machiavelli gave political princes? 

Arroyo will recount the crafty political maneuvers used by leaders of economic reform in Asia during these pivotal eras:  China under Deng Xiaoping; India in the 1990s; Thailand under General Prem Tinsulanonda; Vietnam's Doi Moi; South Korea under Park Chung Hee; Malaysia under Mahathir Mohamad; and Singapore under Lee Kuan Yew.  Arroyo's remarks will be drawn from the paper he has been writing at Stanford on "The Political Economy of Successful Reform: Asian Stratagems," which he describes as "a playbook of useful maneuvers for economic reformers."

Dennis Arroyo is presently on leave from his government post as a director of the National Economic and Development Authority (NEDA) of the Philippines.  He has held consultancies with the World Bank, the United Nations, and the survey research firm Social Weather Stations, and has written widely on socioeconomic topics.  His critique of the Philippine development plan won a mass media award for "best analysis."  He has degrees in economics from the University of the Philippines.  

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Dennis Arroyo

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Shorenstein APARC/Asia Foundation Visiting Fellow
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Dennis Arroyo is a corporate affiliate visiting fellow at Shorenstein APARC for 2007-08. Prior to joining Shorenstein APARC, he worked as the Director of National Planning and Policy Staff at the National Economic and Development Authority in the Philippines. Arroyo also formerly worked as a consultant for the World Bank in Washington DC and the World Bank office in Manila. Arroyo has spent much of his career in survey research with Social Weather Stations (SWS), which is a prominent organization in the World Association for Public Opinion Research (WAPOR).

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Southeast Asia Program

Dating but Not Married: Southeast Asian Security Responses to the Rise of China

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During the Cold War, China was regarded in many corners of Southeast Asia as a sponsor of subversion and communist insurgency. Until the “four modernizations,” its anemic economy and limited ability to project power offered little incentive for Southeast Asian governments to cozy up to Beijing. Relations were often frosty or worse. Clearly, times have changed. Essentially all of the states in Southeast Asia have robust diplomatic and economic engagements with the PRC. Yet security concerns have not evaporated. Most Southeast Asian governments now embrace China, but “hedge” by setting up fall-back security options with the United States and other partners in case the PRC becomes more menacing.

This seminar will explore some of the nuances in Southeast Asian “hedging” strategies. How do various governments view China’s intentions and capabilities? How have they variously sought to engage the United States and others to gain and retain security without antagonizing Beijing? How do these strategies relate to multilateral diplomacy in ASEAN and related forums, and how do they affect the overall “balance of power” in the Asia-Pacific region? Lastly, what pitfalls might hedging entail? These questions are critical, because the reaction of Southeast Asian states to China’s rise will have a major effect on the shape and stability of regional security for years to come.

John D. Ciorciari is a 2007-08 Shorenstein Fellow and is currently completing a manuscript entitled Hedging: Southeast Asian Alignments with the Great Powers since the Fall of Saigon.  He has extensive work experience in Southeast Asia, both as an academic and as a U.S. government official.  He also served as a Visiting Fellow at the Institute of Defence and Strategic Studies in Singapore in 2003-04.  He holds a JD from Harvard Law School and DPhil from the University of Oxford.

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John Ciorciari 2007-2008 Shorenstein Fellow Speaker
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Southeast Asia Program

The Future of Democracy in Southeast Asia

This program will bring together some of the world's leading experts on Southeast Asia and democracy to consider critical questions facing the region. Has the American model of democracy become tarnished in Asia, and is the Chinese model of authoritarian capitalism of growing appeal and significance? What are the dimensions and implications of Islamicization for Southeast Asia? What are the prospects for cleaning up notoriously corrupt party politics? Will the military ever be driven out of politics in places like Thailand and the Philippines? Is the American-led "war on terror" helping stabilize politics in the region, or is it exacerbating already serious problems? What do these developments mean for U.S. foreign policy and American influence in Asia?

 

Kishore Mahbubani, one of Asia's leading public intellectuals, is author of the forthcoming The New Asian Hemisphere: the Irresistible Shift of Global Power to the East; and Can Asians Think? and Beyond the Age of Innocence: Rebuilding Trust Between America and the World. Now the dean and professor of the Lee Kuan Yew School of Public Policy at the National University of Singapore, he served for 33 years as a diplomat for Singapore.

Larry Diamond is a senior fellow at the Hoover Institution, Stanford University, and the author or editor of more than twenty books, including Squandered Victory: The American Occupation and the Bungled Effort to Bring Democracy to Iraq, and the newly-released The Spirit of Democracy: The Struggle to Build Free Societies Throughout the World.

Donald K. Emmerson has written or edited more than a dozen books and monographs on Southeast Asian politics, including the forthcoming Hard Choices: Security, Democracy, and Regionalism in Southeast Asia and Indonesia Beyond Suharto. His latest publication is titled "Challenging ASEAN" (Jan 2008). He is a senior fellow at the Freeman Spogli Institute for International Studies at Stanford University, where he also heads the Southeast Asia Forum.

Douglas Bereuter (moderator) is president of The Asia Foundation. He assumed his current position after 26 years of service in the U.S. Congress, where he was one of that body's leading authorities on Asian affairs and international relations.

Co-sponsored with the Asia Society; Business Executives for National Security; UC Berkeley Center for Southeast Asian Studies; USF Center for the Pacific Rim; and the World Affairs Council of Northern California.

Click here to listen to the audio recording of this panel discussion.

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Kishore Mahbubani author and dean of the Lee Kuan Yew School of Public Policy Speaker National University of Singapore
Larry Diamond Senior Fellow Speaker the Hoover Institution

Donald K. Emmerson

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Senior Fellow Emeritus at the Freeman Spogli Institute for International Studies
Affiliated Faculty, CDDRL
Affiliated Scholar, Abbasi Program in Islamic Studies
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At Stanford, in addition to his work for the Southeast Asia Program and his affiliations with CDDRL and the Abbasi Program in Islamic Studies, Donald Emmerson has taught courses on Southeast Asia in East Asian Studies, International Policy Studies, and Political Science. He is active as an analyst of current policy issues involving Asia. In 2010 the National Bureau of Asian Research and the Woodrow Wilson International Center for Scholars awarded him a two-year Research Associateship given to “top scholars from across the United States” who “have successfully bridged the gap between the academy and policy.”

Emmerson’s research interests include Southeast Asia-China-US relations, the South China Sea, and the future of ASEAN. His publications, authored or edited, span more than a dozen books and monographs and some 200 articles, chapters, and shorter pieces.  Recent writings include The Deer and the Dragon: Southeast Asia and China in the 21st Century (ed., 2020); “‘No Sole Control’ in the South China Sea,” in Asia Policy  (2019); ASEAN @ 50, Southeast Asia @ Risk: What Should Be Done? (ed., 2018); “Singapore and Goliath?,” in Journal of Democracy (2018); “Mapping ASEAN’s Futures,” in Contemporary Southeast Asia (2017); and “ASEAN Between China and America: Is It Time to Try Horsing the Cow?,” in Trans-Regional and –National Studies of Southeast Asia (2017).

Earlier work includes “Sunnylands or Rancho Mirage? ASEAN and the South China Sea,” in YaleGlobal (2016); “The Spectrum of Comparisons: A Discussion,” in Pacific Affairs (2014); “Facts, Minds, and Formats: Scholarship and Political Change in Indonesia” in Indonesian Studies: The State of the Field (2013); “Is Indonesia Rising? It Depends” in Indonesia Rising (2012); “Southeast Asia: Minding the Gap between Democracy and Governance,” in Journal of Democracy (April 2012); “The Problem and Promise of Focality in World Affairs,” in Strategic Review (August 2011); An American Place at an Asian Table? Regionalism and Its Reasons (2011); Asian Regionalism and US Policy: The Case for Creative Adaptation (2010); “The Useful Diversity of ‘Islamism’” and “Islamism: Pros, Cons, and Contexts” in Islamism: Conflicting Perspectives on Political Islam (2009); “Crisis and Consensus: America and ASEAN in a New Global Context” in Refreshing U.S.-Thai Relations (2009); and Hard Choices: Security, Democracy, and Regionalism in Southeast Asia (edited, 2008).

Prior to moving to Stanford in 1999, Emmerson was a professor of political science at the University of Wisconsin-Madison, where he won a campus-wide teaching award. That same year he helped monitor voting in Indonesia and East Timor for the National Democratic Institute and the Carter Center. In the course of his career, he has taken part in numerous policy-related working groups focused on topics related to Southeast Asia; has testified before House and Senate committees on Asian affairs; and been a regular at gatherings such as the Asia Pacific Roundtable (Kuala Lumpur), the Bali Democracy Forum (Nusa Dua), and the Shangri-La Dialogue (Singapore). Places where he has held various visiting fellowships, including the Institute for Advanced Study and the Woodrow Wilson International Center for Scholars. 



Emmerson has a Ph.D. in political science from Yale and a BA in international affairs from Princeton. He is fluent in Indonesian, was fluent in French, and has lectured and written in both languages. He has lesser competence in Dutch, Javanese, and Russian. A former slam poet in English, he enjoys the spoken word and reads occasionally under a nom de plume with the Not Yet Dead Poets Society in Redwood City, CA. He and his wife Carolyn met in high school in Lebanon. They have two children. He was born in Tokyo, the son of U.S. Foreign Service Officer John K. Emmerson, who wrote the Japanese Thread among other books.

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Applications from mid-career and senior Southeast Asianist scholars for the 2008-2009 Lee Kong Chian NUS-Stanford Distinguished Fellowship on Southeast Asia.

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The National University of Singapore and Stanford University invite applications from mid-career and senior Southeast Asianist scholars in the social sciences or humanities who would like to spend up to nine months between August/September 2008 and August/September 2009 at NUS and Stanford writing and doing research on or related to contemporary Southeast Asia.
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ASEAN adopts charter despite differences over Myanmar

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A long-time loose group of countries focused on trade and business, the Association of Southeast Asian Nations is trying to forge a common market roughly similar to the European Union. But the question of how to confront Myanmar's crackdown on democracy has left ASEAN divided. Will Indonesia, Malaysia, Thailand and Singapore start to take a stand on democracy, and are they turning away from the US as China booms? Dr. Donald K. Emmerson is director of the Southeast Asia Forum at Stanford's Shorenstein Asia-Pacific Research Center and the author of many papers and books on the region comments on the adoption of the charter on KCRW's To the Point. Link to audio file of the entire day's show below. Professor Emmerson's interview begins at about 42 minutes into the show.
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