Today's FT has an interesting article about innovation in emerging markets.
Not only do China, India, Brazil and other countries offer companies fast growth prospects; they also generate opportunities for developing new products, services, manufacturing techniques and business processes.If economic growth is desired that innovation in emerging markets probably should be a greater focus of the world's traditional economic powers. It is important to recognize that government R&D is not the same thing as a successful focus on innovation. According to the FT,
These innovations do not yet involve transformational technological shifts – such inventions remain the preserve of the developed world with its long-established universities and commercial laboratories. But the emerging world is spawning product improvements with commercial implications that are game-changing. They do not win Nobel prizes but they do make money.
But scientific pre-eminence does not necessarily lead to economic success, as is demonstrated by Russia’s struggle to diversify out of commodities. Commercial innovation matters more, as China’s rise shows. In dollar terms, Chinese research and development spending has already exceeded Japan’s and is set to beat that of the European Union and match the US in the next 20 years. With R&D labour costs only 20-50 per cent of those in the west, the numbers employed are greater than in the US, EU or Japan.
Top companies are starting to deliver. In 2008, Huawei registered more patents than any other company, according to Wipo, the global patent office. Last year it was second after Japan’s Panasonic. But there is a long way to go: ZTE, another electronics maker, was the only other Chinese entry in the top 100.
Western multinationals complain that Chinese companies steal technology in a government-backed modernisation drive. But many blueprints were handed over voluntarily in co-operation deals: multinationals bet that the risks would outweigh the rewards of entering China. Now, Chinese companies are entering world markets, sometimes in partnership with western rivals, for example in high-speed trains where China’s CSR is working with General Electric of the US and Germany’s Siemens.
Sceptics dismiss many emerging market innovations as incremental improvements. But for business, that is beside the point, when such improvements lead to better products, services and processes. Peter Williamson, international management professor at Cambridge university, says: “The innovations may be incremental. The effects are not.”
6 comments:
The Chinese AP1400 nuclear reactor is being designed by Westinghouse, the first few copies will almost certainly be built by Westinghouse.
The Chinese however will own the blueprints.
All big capital products require a flagship customer. By the time the Westinghouse AP1000 is built in Georgia the Chinese AP1400 will already be running in China.
The Westinghouse AP1000 was submitted to the US NRC for design certification in 2002. It's still not approved.
The author seeks to forgive China's IP thievery by blaming the victim. What he forgot to mention is that China regularly breaks the agreements it had the multinational.
For example, Chinese train technology was transferred by the Japanese under the explicit provision that the trains using the technology could not be sold outside of China.
The CSR/GE partnership breaks letter and the spirit of the deal and illustrates why no company or governments should trust China.
More importantly, western governments should refuse to protect Chinese IP until China starts compensating western firms for the IP they stole over the years.
Do you know why China has a virtual monopoly on rare earth elements? Simple. They ran everyone else out of business by selling below market. Now that they have the market cornered, the price has gone up. IP isn't the only thing China is stealing.
Hi,
Maybe not directly relevant, but I was recently looking for an ambulatory blood pressure monitor (a monitor that records readings every ~30 minutes throughout 24 hours). Given the fact that an OMRON 790IT blood pressure monitor with multiple measurement memory is available for about $70, there is simply no excuse for an ambulatory blood pressure monitor to cost over a couple hundred dollars. (Essentially, all the ambulatory monitor does is to initiate the measurements at a fixed interval, rather than someone having to press the start button.) Instead, U.S. ambulatory BP monitors run into the thousands of dollars.
But there are mainland Chinese sellers on Ebay with ambulatory BP monitors for ~$250.
And people say globalization is bad! ;-)
P.S. Wait 'til Walmart starts selling them. :-)
"Do you know why China has a virtual monopoly on rare earth elements? Simple. They ran everyone else out of business by selling below market. Now that they have the market cornered, the price has gone up. IP isn't the only thing China is stealing."
How is what you've described "stealing"? Selling below market is "stealing"?
It is easy to confuse patents with innovation.
It is difficult to differentiate between those cooperative arrangements between multinationals that are based on Chinese innovation, and those which are based almost entirely on disparate labor costs and political considerations.
At this time, there are very few examples of Chinese innovations that provide Chinese firms with a genuine competitive advantage internationally.
Undoubtedly, there will be many such examples in the future, but their relative frequency is a great unknown.
For at least the next few decades, I predict that cultural and structural impediments within China will result in Chinese companies producing far fewer such innovations than economically equivalent enterprises in the United States or even Europe.
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