Westernization has had a tremendous, positive impact on Chinese human capital. Why? Because over time, western capitalist traditions have uncovered China’s weakest link – a lack of innovation and creativity among its people.
As the traditions of western-style capitalism have infiltrated the Chinese culture since it was open to the west in 1979, a clear and present “innovation gap” has emerged. Leaders of western-style corporations doing business in China, Chinese government officials and educators have recognized Chinese adversity to creativity and innovation, the fuel for a thriving western capitalism model. Fortunately, Chinese authorities have admitted the innovation gap and responded vigorously, launching initiatives and working with corporations to help transform the Chinese workforce from a reactive, execution-orientation to one of creativity and innovation. And the positive effects of these initiatives are already being felt. Consider the following.
The Chinese Education Ministry is developing new curriculum to foster “creative learning”, shifting the current memory-based curriculum to one of more innovation and creativity.[1] Cen Jianjun, Deputy Director General affirms that the status quo model – based on the former Soviet Union model – is simply unacceptable because it does not respond to the needs of the market, which demands a more creative workforce.
Students and educators from Tsinghua University, one of the top universities in all of China, agree that instilling creativity in the minds of Chinese is one of the biggest challenges of the Chinese education system. Long an advocate for the study of western culture, Tsinghua University is pushing individual thought over collective thought aggressively to help overcome the innovation gap.
Realizing the difficulty of fostering creativity and innovation in a culture unwilling to legally protect invention, Chinese authorities have recognized the importance of intellectual property rights and are helping to advance ways to protect IP. For example, the cluster model for manufacturers in China – fostered by the Chinese government – is encouraging clustered firms to collaborate on the management and protection of proprietary thinking. Some signs even suggest a growth in patent applications and management, despite evidence of a continued “imitation” approach to manufacturing for much of China.[2]
For Nortel, huge pay-offs have already been detected. In the beginning, China was a low cost manufacturing source. “Now, what you are seeing is a movement from China as an outsourcing center to an R&D center thanks to China’s investment in higher education. North America, in 25 years, might be in a follower position on a lot of technologies,” says Kalli Lefevre, Vice President, R&D Asia Pacific & Greater China for Nortel. For Nortel, it is simply a matter of teaching Chinese employees how to unleash creativity. Many of the new product innovations sold in the rest of the world stem from R&D work based in Nortel’s Beijing campus. Nortel was the first to locate in the Beijing Zhongguancun Electronic Zone, an area created by the Beijing Municipal Government to encourage high-tech companies to locate in the region.[3]
Corning has found a way to culturally address the need for innovation. At Corning, employees are recognized for creative thinking through a reward and recognition program. Corning bi-annually bestows the “Break the Box” award to employees who “encourage job process improvements, apply breakthrough thinking on the job, and deploy new processes to the job.”[4] A hall of fame of past “Break the Box” award winners is prominently displayed on the company wall. At the top of the sign is the saying, “Only those who see the invisible can do the impossible.” Like Nortel, Corning finds that Chinese employees only need the training and encouragement to innovate. Once they find those two elements, innovation tends to flourish.
Perhaps one of the reasons western firms in China are beginning to see the innovation gap close so quickly is because innovation is not new to China. More than 1,000 years ago, Chinese inventions had far-reaching impacts on global society. Gunpowder, the compass and navigation had dramatic affects on the development and globalization of the world. In the areas of fine arts and craftsmanship, the discovery of porcelain, book-printing and silk-making still have prominence in today’s modern society.[5]
But Chinese authorities know that the heavy hand of government over time created a culture adverse to out-of-line behavior, a component of innovative thinking. And they have readily and publicly admitted to this reality. In an edition of China Daily, the government owned and controlled national newspaper, an editorial cartoon depicted the national economy as a high performance Formula One racecar ready to “speed off” only to be saddled with a wooden wheel labeled “technology”.[6]
But China is making innovation a top priority from the highest levels of government. In a speech by Chinese President Hu Jintao to national scientists and engineers, Hu declares that they must make China "a nation of innovators."[7]
But for China to truly emerge as a “nation of innovators” China must make significant advances still. Consider the following.
China is spending only 1.1% of its GDP on R&D, compared to the developed nations of Japan and the United states who post 3.2% and 2.6% respectively. This suggests that China is still reliant on the old imitation-driven manufacturing model still, not keeping up with the national priority of creating a “nation of innovators.”[8]
The relationship of public and private R&D activity remains constrained, atypical of an innovative society where financial collaboration to foster R&D is high. In China, R&D funding remains politically controlled and directed.[9]
Chinese recipients of the coveted Nobel Prize – the hallmark for innovation globally – had to leave their homeland to pursue their innovations.[10]
The Chinese are conformists by nature, a tremendous obstacle to innovation. In the words of an ancient Chinese proverb, “The bird that flies out of its flock is the first one targeted by hunters.”[11] This type of instruction can be found in the school system still.
To some outside observers, the pursuit of innovation by the government is limited to products, not ideas. Just this week, the government announced that bloggers in China would now have to register their real names and identification card numbers to maintain the ability to post to blogs. Bloggers universally condemned the decision as a direct attack on freedom of expression, yet another critical component of a society that fosters creativity and innovation.[12]
Despite some evidence of IP protection, most foreign observers would agree that the lack of a true rule of law remains a critical problem. This places an incredible burden on innovation because without IP protection, the just reward for creativity is impossible.[13]
GE, a global company known for innovation, has found China still innovation adverse. GE understands that Chinese have lived in a culture that thrives on living by the rules. As a result, GE has had to invest in developing innovative leaders by requiring select new hires to undertake their Management Leadership Program so that the soft skills of leadership, innovation and creativity can be learned. To further the challenge, GE competes regularly with the government on talent recruitment. Top graduates from Chinese universities tend to be lured away to the security of government positions.
So what is the prognosis? Will the adoption of innovation take hold culturally? And should an innovative and creative class flourish in China, can is be sustained?
Innovation is beginning to take hold in China. As suggested above, evidence supports that in pockets throughout the economy, innovation is beginning to flourish. Why? When you combine the will of a centralized government with the will of foreign capital investment, change will occur.
Jeff Gallinat, Vice President of Global Manufacturing at Lenovo believes that while the creativity and innovation gap may still exist, the gap is closing. He suggests that a lack of innovation is a generational dilemma and as Chinese are exposed to new ways of thinking over time, Chinese human capital will adapt. Clearly the need for more stringent legal protection around intellectual property is needed. After all, without IP protection, no one is rewarded for innovation. But the government and business leaders know this and they are working to crack down on IP infringement. This is good news for a firm know for innovation and when translated from its root word “Lengend” means “innovation.”
Firms are finding that the Chinese employee base is young, well-educated, passionate and eager to learn more. This is a good sign for those firms interested in training employees to be more creative. Young employees don’t know what can’t be done and with proper training and the encouragement and tools necessary to do so, the passionate, young workforce, will innovate.
Magnus Gyllo, Vice President of Asia for Atlas Copco agrees. And as part of developing their human capital, Atlas Copco has created a training academy, partnering with local universities to train employees on issues related to company culture and innovation. This is a critical component for Atlas Copco, a foreign firm which believes that the best way to do business is China is to train Chinese to manage Chinese employees.
Fortunately for China, corporations understand the innovation weakness and how to overcome it. They are devising strategies and models to sustain growth through continued innovation.[14] To ensure that their strategies can flourish, however, China will need to further reform and open their markets by allowing capital to flow freely, protect intellectual capital, and ensure true transparency. The US enjoys an “entrepreneurial culture, relaxed labor markets, and free capital flows”, allowing it to be “the most innovative economy in the world.”[15] China will have to follow if they hope to sustain this march to become a “nation of innovators.”
- Harris Vaughan
[1] “Ministry of Education”, Doing Business in China GIE Report, Kira Brown.
[2] “China’s Innovation System and the Move Toward Harmonious Growth and Endogenous Innovation,” Shulin Gu and Bengt Ake-Lundvall, http://www.innovation-enterprise.com/.
[3] “Nortel Overview”, Doing Business in China GIE Report, Alyssa Williams.
[4] Corning “Break the Box Award” Hall of Fame, Corning Campus, Shanghai, China.
[5] “In China, Dreams of Bright Ideas,” Edward Cody, Washington Post, June 17, 2006.
[6] Cody, June 17, 2006.
[7] “Innovation in China,” Bruce Nussbaum, BusinessWeek, June 17, 2006.
[8] Nussbaum, June 17, 2006.
[9] Cody, June 17, 2006.
[10] Cody, June 17, 2006.
[11] Cody, June 17. 2006.
[12] “Chinese Rules Would Keep Blog Registry,” Associated Press, May 23, 2007.
[13] “Technology Innovation in China,” Marco Di Capua, National Academy of Engineering, 1998.
[14] “Obstacles to Innovation in China and India,” CEO of Infosys, BusinessWeek, September 25, 2006.
[15] Cody, June 17, 2006.
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