Author: ceciliazhang

How should China spur innovation and entrepreneurship?   [Copy link] 中文

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Post time 2018-4-26 18:32:15 |Display all floors
This post was edited by sfphoto at 2018-4-27 09:55
huaqiao Post time: 2018-4-26 15:17
Financial incentive is only a part of the equation to innovation. The other one is Research and Deve ...

State-funded technology R&D is needed for high-tech industries because private sector enterprises lack the will and the resources to undertake technology R&D. Most Chinese private sector enterprises focus only on short-term profits and depend upon low-cost manufacturing to compete on price. Only a few high-tech companies such as Huawei have succeeded in global markets by investing in technology R&D while the rest depend upon foreign technology.

China should setup State-funded technology R&D centers focused on high-tech industry clusters such as electric vehicles, robotics, AI, IoT, biotech, e-commerce, nanotechnology, semiconductors, aerospace, new energy, smart cities, CAD/CAM, 4G/5G telecommunications, mobile Internet, 3D printing, healthcare, green buildings, maglevs, high-speed rail, urban transit, drones, supercomputing, animation, quantum technologies, etc. These State-funded technology R&D centers will ideally be located in State-level High-tech Zones which are directly administered by SOEs reporting to the Central Government thus bypassing the local governments.

An example case study is Taiwan’s Industrial Technology Research Institute based in the Hsinchu Science Park. Founded in 1973, the State-funded ITRI succeeded in incubating TSMC and UMC which are the world’s leading companies in the semiconductor manufacturing industry. With a market cap greater than Intel, TSMC is the world’s biggest semiconductor company with 60% market share in the silicon foundry business and has the world’s most advanced 7nm semiconductor process technology, ahead of Intel’s 10nm technology. ITRI also successfully incubated Taiwan’s optoelectronics industry which commands 90% market share in the flat-panel display industry, supplying the world’s leading TV brands and PC OEMs.

Innovation will come only after three things are satisfied:

1). Engineering R&D in Academic Research Institutions:

This is where professors, academicians and PhD students do the Engineering R&D to discover engineering principles based on Applied Science.

2). Technology R&D in Industrial Research Institutions:

This is where researchers, engineers and scientists with Masters and PhDs do the Technology R&D to design prototypes for industrial projects.

3). Product/Service R&D in Hi-tech startups:

This is where entrepreneurs, managers and engineers do the Product/Service R&D to create products or services based on viable business models.

These hi-tech startups are spinoffs from the technology R&D projects and should be given seed funding from the industrial research institutes. After developing a product/service prototype, these startups can then raise additional capital from both State-owned and privately-owned VC firms.

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Post time 2018-4-27 16:05:43 |Display all floors
Jaaja Post time: 2018-4-26 16:27
There are possible challenges with this though.

Chinese SOEs mainly operate in manufacturing, r ...

I have only given a general idea and direction of what China has to do to get ahead in technology. Your views are valid too. You are a proponent of free market and enterprise. For decades, this model has worked. However, I am concerned with wastage of resources in R&D.

For example, off-hand, I can recall the battle between Sony's blue-ray vs Toshiba's(?) HD decades ago. Sony eventually won the battle and blue-ray technology was adopted. Does that mean Toshiba's HD technology was inferior? No, not at all. Imagine the amount of time and resources Toshiba has spent on R&D and then having to give it up.

That is why I think SOE is still the way to go for R&D to cut down on wastage. The "flaws" that you mention should not have happened if there is proper management and follow-up. SOEs are not hurdles in international co-operation but only seems to be so--to the free market mindset. The reason why China gives way in this respect is because China has come to the scene too late and has to compromise.

sfphoto has mentioned some good points in his post too.

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Post time 2018-4-27 16:12:43 |Display all floors
sfphoto Post time: 2018-4-26 18:32
State-funded technology R&D is needed for high-tech industries because private sector enterprises l ...
Innovation will come only after three things are satisfied:

1). Engineering R&D in Academic Research Institutions:

This is where professors, academicians and PhD students do the Engineering R&D to discover engineering principles based on Applied Science.

2). Technology R&D in Industrial Research Institutions:

This is where researchers, engineers and scientists with Masters and PhDs do the Technology R&D to design prototypes for industrial projects.

3). Product/Service R&D in Hi-tech startups:

This is where entrepreneurs, managers and engineers do the Product/Service R&D to create products or services based on viable business models.

These hi-tech startups are spinoffs from the technology R&D projects and should be given seed funding from the industrial research institutes. After developing a product/service prototype, these startups can then raise additional capital from both State-owned and privately-owned VC firms.


Good points.

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Post time 2018-4-28 02:28:55 |Display all floors
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Post time 2018-4-28 02:29:25 |Display all floors
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Post time 2018-4-28 02:35:45 |Display all floors
This post was edited by sfphoto at 2018-4-28 03:38
huaqiao Post time: 2018-4-27 16:05
I have only given a general idea and direction of what China has to do to get ahead in technology. ...

In the past, Chinese SoEs were content to adopt old technologies by entering into joint ventures with foreign MNCs, eg., autos. But that business model is flawed for two reasons: 1). China became dependent upon foreign technologies and 2). Foreign MNCs were then able to exploit this technological dependency to dominate the market in China. Foreign MNCs then complain about this need to “transfer technology” to China, preferring that they should be allowed to sell their products to China without being “forced” into JVs with Chinese SoEs. But this arrangement actually benefits foreign MNCs more than China because that practice created this insidious technological dependency. This phenomenon can be seen clearly in the auto industry where foreign brands hold 80% of the domestic market.

What China needs is its own indigenous technologies because it’s better to have something of your own rather than to have nothing at all. In many cases, the foreign technologies being transferred to China are old technologies that will become obsolete in a few decades. In the auto industry, Chinese companies sell 97% of the electric vehicles made with indigenous technologies which will eventually replace the obsolete gas vehicles made with foreign technologies that are sold under foreign brands in China.

China should support the electric vehicle (EV) industry by funding technology R&D which can be spun-off into State-funded high-tech startups providing EV technology to Chinese SoEs, Chinese private-sector companies and foreign MNCs. This way China can own and control new technologies and set industry standards for emerging industries such as the EV industry. Chinese SoEs have a role to play in innovation but they are too big which makes them too slow. That’s why it’s best for them to adopt indigenous technologies developed by State-funded high-tech startups. And foreign MNCs who want to enter the Chinese market will need to adopt Chinese technology not the other way around.

NO MORE FOREIGN TECHNOLOGY!!!

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Post time 2018-4-28 03:03:54 |Display all floors
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