Innovation in China: Up Against a Wall?

Is China hampered by a “catch-up” approach to innovation?

According to a piece in this week’s Wall Street Journal, that’s the fear of many Chinese economists and scientists. They argue that the Chinese government is taking such a heavy-handed, top-down approach to directing and funding research and innovation that it threatens to hamper the country’s development.

“With innovation, there is serendipity. You need a lot of participants [because] only 1 in 1,000 ideas may succeed,” Bai Chong-en, an economist at Beijing’s Tsinghua University, told the Journal. “It’s just like ping pong, where there is a lot of grass-roots participation.”

Offering another view, however, is former World Bank chief economist Justin Yifu Lin, who argues that China can essentially follow the path laid out by Japan: Develop your economy by imitating others—but then improving on their products. “Our innovation doesn’t necessarily have to be based on invention,” Lin said.

Interestingly, Peter Drucker may well have said that both men were right.

Although Drucker felt that big entities could be innovative—and could point to many examples—he thought that state-funded research often got bogged down because of the sheer size of the institutions behind it.

“The least-productive environment has clearly been government-sponsored research, which almost by definition is ‘big research,’” Drucker asserted.

As for the notion that China could follow the path of Japan and rely largely on imitation, Drucker would probably have been sympathetic, at least up to a point. Japan, Drucker noted in 1994, had built up its economy by “doing better—often much better—what other developed countries are already doing well,” and it could probably get more years of mileage out of that strategy.

But it was a role much more suited to a developing country rather than a developed one. That’s why Drucker also warned that clever copying wasn’t a long-term plan. “With Japan now a world leader, the country cannot hope to maintain its leadership position by what I have been calling ‘creative imitation,’” Drucker warned.

China is nowhere near as developed as Japan, so imitation may still have a good run ahead of it. But of course it’s not the only way to go.

What model do you think China would be wisest to follow for now—and why?