Presentation on theme: "Science & Technology in China"— Presentation transcript:
1Science & Technology in China BrusselsScience & Technology in China-Some IssuesProf. Dr. Max von Zedtwitz
2China is Undergoing a Massive Economic Expansion Fastest economic expansion ever!CAGR 80-00: 9.6%CAGR E: 7.8%Real GDP(US$ Bn)GrowthTime period2500China’s 20 yr economic reform7Xover 20 years2000Japan post WWII recovery6Xover 25 years15002nd Industrial Revolution10003.5Xover 60 years5001st Industrial Revolution2.5Xover 100 years198019851990199520002010ESource: China Statistical Yearbook; BCG analysis
3S&T is on the Agenda Increasing S&T literacy Shift towards Research Intellectual Property RightsBuilding competitiveness… and many others!
4China’s Agenda for S&T: Increasing S&T Literacy R&D amount to about 1.5% of GDP in 2004, up from 0.7% in late 1990sAnnual growth rate of 15% between 1991 and 2002, far more than the average growth rate of Western economies (2-3%)Expected focus of national innovation system:Basic researchUniversity expansionsNational science foundationInformation and telecom infrastructureChallengesOECD countries, India will react (Japan has increased R&D to GDP ratio by 1% to 3.2% within a decade, too)Only 5% of China has tertiary education: much potential (US: 37%, Europe: 24%), but also much to do to catch up
5In China, Number of Graduate Students is Increasing Fast
6Relative Share of Graduates from Different Faculties PhilosophyEconomicsSciencesEngineering
7China’s Agenda for S&T: Shift to Research In many areas, China is still in the stage of external technology assimilationHowever, foreign R&D activities are poorly integrated in the Chinese N.I.S.Focus is on technology absorption and generation of production capacityAs long as markets are expanding, there is no need to invest in research and much incentive to spend on marketing, distribution, manufacturing competenceAssessmentOnce external technology inflow subsides, necessary infrastructure of original innovation may be missing and may take a long time to build up (example: Japan)Continued investment in production know-howWithdraws talents from researchEstablishes a path dependency with respect to sunk costsLenovo-IBM: Buy into a dying industry?
8Foreign R&D Fairly Independent from Chinese Innovation System Cooperation with Chinese Academies and Research Institutes2003: 154 bn RMB (15 bn Euro) R&D in ChinaAbout 60% corporate, 30% gov’t R&D, 10% universitiesAbout 380 R&D central gov’t labs and 4’000 labs in provincesCAS, MOST, NSFCGood infrastructure with respect to spin-offs and S&T parks/incubatorsProblems:Tsinghua, Fudan, Beida, etc.: Exaggerated expectations in terms of own value (still, costs per project comparatively low)Most lack project management abilityFew professors speak EnglishLoss of IP(?)No brain drain observed in MNC – CAS collaborationsMNCs get little sponsorship from NSF or MOST programsLittle spill-over (training, etc.) observed (Wang 04, Yuan & Lu, 05)
9Relevance: Why is China attractive for Foreign R&D? Majority of foreign R&D sites established for market reasonsChina a potential market of 1.3 billion customersGrowing wealth of Chinese populationFairly inaccessible local science and technologyNational R&D intensity: about 1.5% (advanced countries: about 2+%)Increasing number of Chinese patents and Chinese papersTotal of 743’000 scientists and engineers annually (second worldwide)WTO and domestic reforms (IPR, law enforcement, VC, etc.)Bright people available for good priceBEA Systems, 2002: First ever int’l R&D site in ChinaLG, 2002: Largest int’l R&D site in ChinaMotorola, 2003: 18 R&D labs in ChinaPRC Gov’t, 2005: 700+ R&D centers in China
10Rise of Foreign R&D Labs in China ‘87‘88‘89‘90‘91‘92‘93‘94‘95‘96‘97‘98‘99‘00‘01‘02‘03246810121416182022# of R&D labs / yearSTS (2003) and own research
11Foreign R&D Location in China Development in ShanghaiHistoric reasons (also, more expats)Close to customers & productionFast-pacedCentral locationResearch in BeijingStandardization and decision-making bodies> 100 universitiesCluster vs. crowding-out effectsBut: Decision to be made case by case: account for industry and R&D focus (e.g., Pharma, TCM Shanghai; IT, Genetics Beijing)17818149612Anzahl Fragebogen: 30 Stück, davon vom Konsortium ausgefüllt: 81195Zedtwitz (2004): R&D in China. R&D MgtCh-11
12China’s Agenda for S&T: IPR Management Traditional attitude to art and craftsmanship promoted copying of old masters“To Steal a Book is an Elegant Offense”Useful for diffusion of technology, but not necessarily for inventionAlthough China has been home to a large number of important inventions, few were protected by any legal institutions (such as IPR)The current record of IPR in China shows weak incentives for inventionAssessmentProblem is mostly with respect to IPR enforcement, not lawForeign MNCs are considering to retreat cutting-edge technologies and investments unless IPR situation improvesAs some Chinese companies develop into technology companies they too will be unable to reap the benefits of their work
13Domestic and Foreign Patent Applications in China Ref: Hu and Jefferson (2005)
15China’s Agenda for S&T: Building Competitiveness The origins and mainstay of Western multinationals lie in their ability to develop unique technological capabilities (eg, Microsoft, Merck, Shell, Siemens, etc.)International success is tied to innovative capacity and the ability to stay abreast of latest technology (R&D, NPD)AssessmentWestern and Japanese firms have built up international innovation organizations around a core R&D centerOnly a handful of Chinese companies have started to do soMain limitations:Lack of international experience: no global managers, lack of EnglishLack of R&D experience: no R&D expertise, no R&D currencyNo cost advantages abroad: int’l R&D comparatively expensiveMost companies still young and small: focus on short-term, not R&D
16Strong R&D Basis for International Competitiveness Why a Chinese firm would internationalize R&D:Access to local technology and market intelligenceHiring foreign expertsDeveloping a global imageSupporting local salesExample Haier:R&D in Qingdao, Beijing, GuizhouR&D in Hong Kong (SAR), London, Silicon Valley, Sydney#5 white-goods company worldwideCompetes & cooperates with companies like Siemens, Whirlpool, GE A necessary (for some) but painful process!
19Recent Referencesvon Zedtwitz, M. (2004): Managing Foreign R&D Labs in China. R&D Management, Vol. 34, No. 4,von Zedtwitz, M. (2006): Connecting Science to Innovation: Managing R&D on a Global Scale. Edgar Elgar: Cheltenham.Gassmann, O.; von Zedtwitz, M. (2003): Trends and Determinants of Managing Virtual R&D Teams. R&D Management, Vol. 33, No. 3,von Zedtwitz, M.; Gassmann, O. (2002): Market versus Technology Drive in R&D Internationalization: Four different patterns of managing research and development. Research Policy, 31, 4,von Zedtwitz, M. (2003): Initial Directors of International R&D Laboratories. R&D Management, Vol. 33, No. 4,Fischer, W.A.; von Zedtwitz, M. (2004): Chinese R&D: Naissance, Renaissance, or Mirage? R&D Management, Vol. 34, No. 4,Boutellier, R.; Gassmann, O.; von Zedtwitz, M. (2006): Managing Global Innovation - Uncovering the Secrets of Future Competitiveness. 3rd ed. Springer: Heidelberg