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China, Patronage And Innovation

Business, China, Company Strategy, Economics, Innnovation, Knowledge management, Managing people
By John Richardson on 21-Mar-2013

Lewis.bmpBy John Richardson

CHINA has to improve innovation if it is to avoid the middle-income trap.

Some people assume that success is a given because of China’s great achievement of lifting hundreds of millions of people out of absolute poverty over the last two decades.

But rapid industrialisation and infrastructure spending, which were the methods of achieving the above, are perfectly suited to a heavily-controlled political system. Resources can be easily mobilised on a huge scale when the state controls both finance (the state-owned banks), and, to quote Marx, “the means of production” (the state-owned enterprises).

Now the challenge is to foster the right degree of creativity essential for innovation within what some people warn are the “confines” of the political system.

One of Xi Jinping’s tasks is to ensure that the system is flexible enough to allow small, start-up companies to spring from nowhere and become producers of world-beating brands, while  ensuring that reforms don’t undermine the political system.

South Korea became a democracy before successfully escaping the middle-income trap, as we discussed in chapter 10 or our e-book, Boom, Gloom & The New Normal.

Bill Dodson, author of China Fast Forward: The Technologies, Green Industries and Innovations Driving The Mainland’s Future*, provides a bleak analysis of China’s current innovation environment.

“As Thomas Kuhn wrote in his seminal study of the work of scientists, ‘The Structure of Scientific Revolutions’, most often discoveries are resisted by peers who have vested interests, yet eventually ‘the community of scientists adapts – typically in nonviolent ways – as the discovery becomes a fact that expands on previous understanding,” he wrote.

“The scientific method is supposed to weed out wrong or misleading results and researchers to contribute to a base of standing knowledge upon which others may continue to build. The court systems in a civil society function similarly, with judgments passed based on a body of evidence that is indisputable in its objectivity and certainty.

“Both science and society in China are based on patronage, though. Patrons are typically political appointees with ties to the Chinese Communist Party. They are made department heads, school directors and research presidents.

“Often, political appointees have little or no experience in the fields they are charged to manage. Subsequently, patrons themselves dole out positions of responsibility to scientists, funding for projects, even living quarters for the families of researchers. Consequently, researchers learn not to ‘bite the hand that feeds’ if one wants to advance his or her career.”

This “network of patronage” means that China is ill-equipped to develop the innovation necessary to deal with its huge environmental problems, said Dodson. 

China’s economy has become increasingly dominated by the state-owned enterprises, which, according to Dodson, is bad news for innovation.

“The larger the enterprise and more closely aligned with national industrial policy, the fewer degrees of freedom of research & development interests and commercial viability the entity has,” he added,

Yigong Shi and Yi Rao, deans of Life Sciences at Tsinghua and Peking Universities said in an editorial in Sciences Magazine: “It is an open secret that doing good research is not as important as schmoozing with powerful bureaucrats and their favourite experts. China’s current research culture wastes resources, corrupts the spirit, and stymies innovation.”

The Chinese themselves, according to a survey by the design agency, frog, think it will take some time for China to catch-up on innovation.

“Companies like Apple, Microsoft, Google and Samsung were regarded as more innovative than local businesses such as HTC, Huawei, Tencent and ZTE,” wrote the marketing news and analysis service, Warc, in its report on the frog study.

“A third of respondents thought it would take more than ten years for Chinese companies to become as innovative as those in the West, while a further 25% felt it would take between six and ten years.”

Is it, though, just a question of time?