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Martin Kenney
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Venture capital (VC) investment provides a unique mechanism for gauging the technological and entrepreneurial sophistication of a national economy. It is no surprise, then, that the two giants of Asia—China and India—have rapidly become important destinations for VC investment. The latest data available from Ernst & Young reveals an astonishing development: China received more VC investment than any nation except the United States. India, though lagging behind China, still received $862 million. To compare, over $30 billion in VC money was invested in the United States in 2007; $823 million was invested in Canada. Clearly, China and India are becoming nodes for the global VC practice. Many of the largest and most prestigious Silicon Valley VC firms have established significant presences in both nations.

China and India differ in many ways, but with respect to the development of VC they share important characteristics. Until late 2008, both nations had rapidly growing consumer economies. The Chinese and Indian governments and populations both agree that education—and particularly engineering—is critical to their future. Both China and India are leaders in sending their graduate students abroad, which has created a pool of well-trained nationals overseas who can advise their peers at home, or even return home themselves to set up new ventures. Many of these Chinese and Indian nationals have worked in U.S. sciences and engineering-based firms. Such professional experience, especially during the last two decades, has laid the basis for successful technology-based entrepreneurship, and the growth in VC that accompanies it.

When VC investing is viewed globally, U.S. dominance is unquestioned. In the United States, 30–35 percent of all VC-financed firms are located in the San Francisco Bay area. Another 10–12 percent are located in the Boston and New York areas, respectively. In India and China, VC investments are similarly concentrated, and generally occur in locations with the greatest concentrations of highly educated persons. As Table 1 indicates, the investment concentration is remarkable. Forty percent of all the VC-funded firms are located in Beijing, 26 percent are in Shanghai, and the Southern Chinese triangle of Shenzhen, Guangzhou, and Hong Kong accounts for another 14 percent. VC investment in China is even more concentrated than in the United States.

Table 1 VC Investments in China and India by City, 2004–2007
(more than 5 investments per city)

Chinese City    Number of Firms    Percent    Indian City    Number of Firms    Percent
Beijing                   213                  40          Bangalore           55                    38
Shanghai               137                  26          Mumbai              31                    21
Shenzhen                36                    7          Chennai             21                     14
Hong Kong              19                    4          New Delhi           16                    11
Guangzhou             16                    3           Hyderabad          11                     8
Hangzhou               13                    2           Pune                   8                      5
Nanjing                  11                    2             n/a       
Suzhou                    9                    2             n/a       
Wuhan                     7                    1             n/a       
Others                   66                   13           Others                4                      3
Unknown                  1                    0          Unknown             0                       0
Total                      528               100            Total                146                  100
Binational                9                    2          Binational             45                    31


VC-backed startups in India, though more diffuse in terms of the top six, are more concentrated overall. Three city regions—Bangalore (38 percent), Mumbai (21 percent), and Chennai (14 percent)—attract the largest investment. However, when including Delhi (11 percent), Hyderabad (8 percent), and Pune (5 percent), these six cities account for an even greater percentage of overall VC investment. The most technology-oriented cities in both nations, Beijing and Bangalore, have received approximately 40 percent of all VC investment. The second largest recipients are Shanghai and Mumbai, which are also the financial capitals.

In China, an enormous economy growing at nearly 10 percent per year even as it emerges from a socialist past, there are significant opportunities in infrastructure development and in supplying the burgeoning underserved consumer market. In a recent Ernst & Young report, Fan Zhang, one of the founding managing partners of Sequoia Capital China, was quoted as saying that “one of the factors that attracted Sequoia Capital to China is the country’s booming consumer market that provides an opportunity to create companies to define certain sectors and fill the need for strong brands, not only in technology but also tech-related consumer services and more traditional industries.”

Zhang is correct—VC investing in China does not directly compete with U.S. firms seeking VC investment. Table 2 shows the fields that VC firms are targeting in China. The table is divided into two binary categories—whether the firm receiving the investment targets the domestic or the global market across a variety of industries, and whether a given firm is in a high technology or non-high technology sector. Chinese firms, even those in technology-based fields, overwhelmingly target the domestic market (87 percent). The Internet has given rise to the largest number of VC startups, nearly all of which are focused on the Sinophone market. Two other key areas—software (10 percent) and mobile phone applications (10 percent)—also cater almost exclusively to the Chinese market. This domestic focus suggests that it will be quite some time before VC-backed Chinese firms threaten counterpart firms in the United States. A possible exception may be semiconductor design, where there are some Chinese startups. Though few Chinese VC-financed firms are likely to be directly competitive with U.S. firms in global markets, many of these Chinese firms compete ferociously against U.S. multinationals trying to make their own inroads into the Chinese domestic market.

Table 2 VC Investments in China and India by Sector and Market, 2004–2007

                                         India                               China
Sector                      Domestic*    Global         Domestic **    Global

Semiconductors               0               7                  22                20
Internet                        16               3                144                  2
Software                         2             14                  55                  4
Communications              1               4                  23                  9
Services                          4             53                  28                  9
Mobile phone                   7              5                   51                  1
Media                             2              0                    35                 0
Healthcare                      1               4                   26                 4
Retail                             1               1                   19                  0
Miscellaneous                  2               0                  20                  2
Components                    0               0                   2                   1
Energy                            0               0                   6                   8
Environment                    0               0                   5                   1
Manufacturing                  0               0                 25                  6
Total                              34             91                461                67

 

* Domestic firms are identified as those that made no apparent attempt to serve overseas markets.

The profile of Indian firms differs from those in China. First, Indian firms are internationally oriented (73 percent); only 27 percent focus on the domestic market. With respect to sector concentration, VC investing in India favors the services sector (46 percent) and software (13 percent). This is not surprising, given India’s well-known comparative advantage in these arenas. Unlike most VC-backed companies in China, many Indian firms may well create competition for U.S. service firms, despite the less developed nature of the Indian economy as a whole.

China and India continue to attract significant VC investment, albeit in different sectors. Today, China is second only to the United States in terms of VC investing, and this is unlikely to change. In China, the preponderance of VC investment is geared to the rapidly growing internal market. The size and unique nature of this market offers entrepreneurs lucrative opportunities to provide “knock-off” U.S. Internet sites for the Chinese market. There are Chinese interpretations of Yahoo!, Google, eBay, Facebook, and Monster.com that service Chinese customers. These firms are self-limited by the language; as such, they do not threaten companies overseas. Moreover, these Chinese companies do not own unique or global class technology that could challenge larger multinational players. It is unclear whether this situation will change over time.

Indian firms differ from Chinese firms in their strong outward orientation. In percentage terms, more Indian than Chinese firms operate in hard-core technology fields. Thus, while China currently enjoys greater VC investment, it is possible that Indian firms may ultimately play a bigger role in the global economy.

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What makes some governments perform better than others? With rising levels of decentralization and local democracy, the focus of "good governance" is increasingly shifting from national to subnational levels. While much of the existing development literature remains preoccupied with formal institutional and society-centered explanations, there is growing evidence that local policy reforms are strongly affected by informal norms and elite-centered processes.

Post-Suharto Indonesia, a country with one of the most pronounced shifts to democratic decentralization anywhere in recent history, is a case in point. Drawing on empirical comparisons across ten districts (comprising 1000 business surveys and 150 interviews), Dr. von Luebke argues that societal pressures are often less significant in explaining policy differences than the quality of local government leadership. In the early transition to democracy, local firms, associations, and district councils continue to be constrained by collective action and political incentive problems. Local government leaders, on the other hand, have wielded historically strong formal and informal powers and stand, for better or worse, at the gateway to local policy reform. Motivated by direct elections and prospective donor funding, some district heads have become catalysts for better governance by introducing informal public-private dialogues, innovative monitoring instruments, and meritocratic promotion schemes. In response to current development debates, these findings highlight the importance of government leadership as an often underestimated policy determinant that can compensate for weak societal checks in periods of transition from authoritarian rule.

Christian von Luebke is completing a book manuscript titled “Heterodox Governance: The Political Economy of Local Policy Reform in Post-Suharto Indonesia.”  He has been awarded a 2009-2011 German Science Foundation Fellowship for a follow-up project incorporating cases from the rest of Southeast Asia and China.  In 2001-2006 he worked in rural Indonesia as a technical advisor for the World Bank and the German Development Agency. He holds a Ph.D. in public policy from the Crawford School of Economics and Government at the Australian National University.

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Christian von Luebke is a political economist with particular interest in democracy, governance, and development in Southeast Asia. He is currently working on a research project that gauges institutional and structural effects on political agency in post-Suharto Indonesia and the post-Marcos Philippines. During his German Research Foundation fellowship at Stanford he seeks to finalize a book manuscript on Indonesian governance and democracy and teach a course on contemporary Southeast Asian politics.

Before coming to Stanford, Dr. von Luebke was a research fellow at the Center of Global Political Economy at Waseda (Tokyo), the Institute for Developing Economies (Chiba), and the Center for Strategic and International Studies (Jakarta). He received a JSPS postdoctoral scholarship from the Japan Science Council and a PhD scholarship from the Australian National University.

Between 2001 and 2006, he worked as technical advisor in various parts of rural Indonesia - for both GTZ and the World Bank. In 2007, he joined an international research team at the Institute of Development Studies (IDS) analyzing the effects of public-private action on investment and growth.

Dr. von Luebke completed his Ph.D. in 2008 in Political Science at the Crawford School of Economics and Government, the Australian National University. He also holds a Masters in Economics and a B.A. in Business and Political Science from Muenster University.

His research on contemporary Indonesian politics, democratic governance, rural investment, and leadership has been published in the Bulletin of Indonesian Economic Studies, Contemporary Southeast Asian Affairs, Asian Economic Journal, and ISEAS. He regularly contributes political analyses on Southeast Asia to Oxford Analytica.

Christian von Luebke 2008-2009 Shorenstein Fellow Speaker Shorenstein Asia-Pacific Research Center
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Since 1995, the offshoring of services to India has rapidly evolved from a curiosity only studied by a few scholars to a phenomenon portending a major shift in the geography of global economic activity. The article examines the evolution of Indian global services provision quantitatively and qualitatively through the use of four case studies. The first case study examines the challenge that the Indian information technology systems integrators (ITSIs) pose to the formerly larger—but now roughly comparable in terms of employment—incumbent developed-nation ITSIs. Because IT systems have become central to nearly every enterprise, the second case study illustrates the wide variety of enterprises that now have significant Indian offshore operations. The third case study describes the rapid growth of offshore integrated circuit design in India, a nation with now commercial-scale integrated circuit production. The final case study describes the emergence of high-opportunity entrepreneurial startups in India and the increasing number of Silicon Valley startups that very early in their lives or even as part of their business model have significant operations in India. The concluding discussion situates India within the global economy and speculates upon its future evolution.

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Rafiq Dossani
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A group of writers and academics in China in recent years have come to be known as the "New Left." But the range of views encompassed under this rubric is broad and seemingly contradictory. Many are critical of the inequality that has come from the market reforms; some seem to look fondly back on the Maoist system and even the Cultural Revolution, while others hold very different views, preferring to call themselves "critical intellectuals," who see a "Chinese alternative" to a neoliberal market economy. This panel will explore the range of views within this group loosely termed the "New Left," to understand what exactly the "New Left" is. How are these "New Left" views different from the Old Left? What are the implications of these views for China's political and economic reforms? Discussing these issues are Wang Hui, a central figure in the "New Left" in China, and David Kelly, a leading Western scholar on the subject.

Wang Hui is professor of Chinese language and literature at Tsinghua University and guest professor at Nankai University. In May 2008, he was named one of the world's top 100 public intellectuals by Foreign Policy magazine. His essays, commentary, and teaching examine the paradoxes of social change in modern and contemporary China. He was editor-in-chief of Dushu, China's leading intellectual journal.

David Kelly is Professor of Chinese Politics at the China Research Centre, University of Technology Sydney. Professor Kelly's work ranges widely across Chinese politics: intellectual history, especially of Marxism and liberalism; political sociology, mainly of intellectuals, urban homeowners and migrant workers; and public policy, focusing on the dilemmas of governance under turbulent current conditions.

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Wang Hui Distinguished Practitioner and Visiting Professor, Center for East Asian Studies Speaker Stanford University
David Kelly Professor Speaker University of Technology Sydney
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Reckoning with the Past:  Truth, Justice and Reconciliation in Asia

Is it possible to come to terms with the violent past and foster reconciliation with former foes, what are the obstacles and how can they be overcome? These are some of the questions we are asking in the "Divided Memories and Reconciliation" project. This colloquia will bring several scholars to Stanford to discuss the ‘history problem' in a series of lectures analyzing the ways in which past conflict has or has not been addressed and resolved in contemporary Asia. Examining issues of memory and forgetting, guilt and innocence, apology and restitution from diverse social science perspectives, our speakers investigate the handling of the violent past both within and between countries in contexts ranging from international diplomacy to the broadcast media to mass education.

In November of 2008, the head of the Japanese air self defense force, General Tamogami Toshio, resigned in a swirl of controversy over an essay he wrote entitled "Was Japan An Aggressor Nation?" The essay argued that Japan's seizure of Korea and of northern China was a legal act and that it had pursued a moderate policy of modernization in its colonial rule of Korea, Taiwan and Manchuria, superior to the colonial rule of the Western imperial  powers. General Tamogami also argued, in his published essay, that Japan's war with the United States was a result of being "ensnared in a trap that was carefully laid by the United States to draw Japan into a war." What is the story behind this controversial incident? What does it mean when a senior Japanese military officer holds such views of the wartime past? What are the implications of this for Japan's security relations with its neighbors and the United States?

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Daniel Sneider Speaker
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In recent decades, nationalism has become a bad word among many liberal Western scholars, who have highlighted the political agendas and usages of nationalist discourse, frequently associating it with fascism, patriarchy, conservatism and protectionism. Unlike many Western countries in which right-wing groups have attempted to monopolize nationalism, in the Koreas, it has been associated primarily with the ‘left’: in South Korea, with anti-authoritarian democratic movements, and in North Korea, where nationalism has been one of the founding principles of the Communist Party. Dennis Hart argues, however, that there are multiple nationalisms on the Korean peninsula that cannot necessarily be subsumed under simple left-right rubric: some are more open and inclusive, some more grassroots-based and self-affirming, and others more aggressive, exclusive, state-driven, and exceptionalist. What both Koreas have shared in their respective official nationalist discourses, however, has been the state-led effort to show their citizens that they are the only legitimate representative of ‘true’ Korean identity, and that the other Korea is a pretender or puppet state. Needless to say, both sides have targeted history in their attempts to compete for hegemony over Korean nationalist discourse. In this lecture, Dennis Hart juxtaposes North and South Korean state narratives to show how the same historical moments and events are remembered (in other words, appropriated and mobilized) by each state in different ways. Also discussed are how people of North and South Korea respond to or protest against the state narratives of the nation, and how they struggle to articulate alternative memories and by extension alternative nationalisms.

Dennis Hart is the associate director of the Asian Studies Center at the University of Pittsburgh, and an affiliate professor in the Graduate School of Public and International Affairs. He received his PhD in political science from the University of Washington. Professor Hart’s research and teaching interests include nationalism, culture and identity, and politics in North and South Korea.

He is currently working on a pair of book projects: Politics and Culture in North and South Korea, which will be published by Routledge Press, and Letters from the Empire, a collection of political essays.

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Dennis Hart Asian Studies Center Speaker University of Pittsburgh
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Some theorists of modernization have influentially claimed that successful "late industrialization" led by developmental states creates economies too complex, social structures too differentiated, and (middle-class-dominated) civil societies too politically conscious for non-democratic rule to be sustained.  Probably nowhere has this argument-that democratic transitions are driven by economic growth-been more celebrated than in Northeast and Southeast Asia (Pacific Asia).  South Korea and Taiwan, having democratized only after substantial industrialization, seem to fit the narrative well.  Prof. Thompson will argue, however, that "late democratizers" have been the exception rather than the rule.  Indonesia, the Philippines, and Thailand democratized much earlier in the developmental process, before high per capita incomes were achieved.  Malaysia and especially Singapore are more wealthy than they are democratic.  The communist "converts" to developmentalism, China and Vietnam, are aiming for authoritarian versions of modernity.  "Late democratization" via modernization is only one scenario.  The experiences of Pacific Asia support Barrington Moore's thesis that there are other "paths to the modern world." 

Mark R. Thompson is a professor of political science at the University of Erlangen-Nuremberg in Germany.  A Chicago native, he took his first degree in religious studies at Brown University followed by postgraduate work at Cambridge University and the University of the Philippines.  Fascinated by Philippine “people power,” he wrote his dissertation at Yale University on the anti-Marcos struggle (Yale University Press, 1996). After moving to Germany, he witnessed popular uprisings in East Germany and Eastern Europe, inspiring him to conceptualize “democratic revolutions” in essays later published as a book (Routledge, 2004).  He is in residence at Stanford from February through April 2009.

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Mark Thompson 2008-09 Lee Kong Chian NUS-Stanford Distinguished Fellow Speaker Stanford University
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