Friday, December 03, 2010

Innovation in China

Responding to China Is Not About to Out-Innovate the U.S. in Harvard Business School Blogs.

Patents are a poor standard for measuring innovation, agreed. But while this article successfully refutes the point about patents (the focus of the Economist article, but which takes up less than one paragraph of the longer WSJ article) it does not establish its main point, that China will not overtake the US in innovation.

To make the larger point, the author needs to show that the quality of Chinese innovation is less than that of the Americans'. But while making one part of that - that Chiense patents are of low quality - the author does not make the other part of it - that American patents are of high quality. Indeed, there is actually a comparison made to other low quality business-method patents filed in the U.S. And while the statement is made that the American and European offices are where all high quality patents are filed, nowhere is this supported. The author simply appeals to a natural prejudice on the part of the reader.

The WSJ article has a much more interesting take on Chinese innovation than a reading of the response here would suggest. The author describes six "killer apps" that propelled western economies ahead of the Chinese at the dawn of the industrial age, developments like democracy, competition and scientific method (and none of which, interestingly, were patented, or even patentable).

The WSJ article does not note, but it should be observed, that these six apps are all based in what might be called the atomistic view of the world, or more broadly, an approach to the world that viewed counting and quantity, and not essence or quality, to be key to understanding. The dawn of a new world view spawned the Copernican revolution, Cartesian method (and geometry), market economics, and representation by population.

According to the WSJ, the Chinese response in the 21st century is to catch up by doing 'more' - "consume more, import more, invest abroad more and innovate more". I think that's correct, to a point. But the Chinese have also embraced a world view that is probably the next step beyond quality and quantity.

The Chinese do not govern themselves merely by counting. I think (and here I speculate) that such a form of government would be seen as crude and cumbersome. We know from observation that Chinese politics requires negotiating a complex set of relationships. Chinese foreign policy also appears to operate in that way; no tactic is ever employed to obtain a simple cause-effect response, but rather to influence numerous variables at once, with an eye not merely to the short-term but also to the long game. This is why, for example, China is "the world's leading manufacturer of wind turbines and photovoltaic panels."

Now of course the merits of this argument could be debated. It could be questioned whether the Chinese are adopting a more network-based approach, built on consensus and cooperation. And it could be questioned whether such an approach is more effective, and would produce more innovation. And then, finally, there is the question of whether this approach would show up at all in the form of patents, or whether - like the dawn of the industrial revolution - this manifests itself through cultural and social change.

But because these are open arguments, and because the possibility that the Chinese may be pursuing new forms of innovation is not considered at all by the author, not even to the point where they are at least countenanced in the WSJ article, the author fails to make his point. Americans depending on their country's innovative capacity will have to look elsewhere for reassurance.


  1. Very deep points. Insightful.

    However, there is at least one point that must be raised. If China is out-innovating the USA, it is not apparent here. The Facebook and Google are not Chinese.

  2. Agreed, Daniel. But the point isn't that China is currently out-innovating the U.S., but that they will some time in the relatively near future out-innovate the U.S.

    I would also add that if China did indeed invent a Google or a Facebook, we would not know of it for quite some time, as it would be in Chinese only, at least for a while, and used by the Chinese audience only.

    That said, while I don't know about search engines, I am quite sure China had social networking applications that started up near or before Facebook. for example has been online since 1998 Or there's Discuz, from 2002.

    You might be inclined to say that, well then, Facebook is larger and more popular than the Chinese sites. Wrong again. Besides being earlier, the Chinese sites are larger.

    How about revenues, then? China's Tencent, with a billion dollars in revenues annually by 2008, has them all beat.

    More on Chinese social networking sites:
    Interestingly none of this can be found on Wikipedia. Wikipedia editors do not consider China important.

  3. @Downes Have you considered that another reason that we haven't yet seen a Chinese Facebook or Google, is that China is focused on creating new industries rather than new organisations? For example (and to build on your wind turbine point) the banks in Shanghai are collaborating around a single, massive, shared services backend to drive down costs and enable the (now white label) partner banks to focus on consumer innovation. While non of the individual banks is that big, taken together they are huge.

  4. I hadn't considered that, but it's a reasonable observation, and your point is well taken.

  5. May I ask, what are these six "killer aps" mentioned here? I have been doing some searching and couldn't find specific products mentioned.

    And I agree with the point that China is employing industrial focus rather than developing new companies, you don't see many new Chinese firms today.

  6. You had to follow the link to find the 'killer apps'. For people who don't follow links, here they are:

    • Competition: Europe was politically fragmented, and within each monarchy or republic there were multiple competing corporate entities.

    • The Scientific Revolution: All the major 17th-century breakthroughs in mathematics, astronomy, physics, chemistry and biology happened in Western Europe.

    • The rule of law and representative government: This optimal system of social and political order emerged in the English-speaking world, based on property rights and the representation of property owners in elected legislatures.

    • Modern medicine: All the major 19th- and 20th-century advances in health care, including the control of tropical diseases, were made by Western Europeans and North Americans.

    • The consumer society: The Industrial Revolution took place where there was both a supply of productivity-enhancing technologies and a demand for more, better and cheaper goods, beginning with cotton garments.

    • The work ethic: Westerners were the first people in the world to combine more extensive and intensive labor with higher savings rates, permitting sustained capital accumulation.

    (Yes, I agree, they're not 'apps'. But if you read the text of the article, it makes it clear that these are what the author is calling 'killer apps'.)


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