China Innovation

Topics: China, Hong Kong, Developed country Pages: 103 (6928 words) Published: February 25, 2014

Steven Veldhoen
Anna Mansson
Bill Peng
George Yip
Bruce McKern

An Emerging Innovation Power
2013 China Innovation Survey

Contact Information
Booz & Company

China Europe International Business School

Steven Veldhoen

George Yip
Professor of Management

Bill Peng

Bruce McKern
Professor of International Business

Sarah Butler
John Jullens
Huchu Xu
Anna Mansson

The authors would like to thank Booz & Company’s John Jullens, Charles Wong, Olivier Pincon, Eric Chen, and Michelle Wang for their contributions to this Perspective. In addition, the authors would like to thank Mariska Kiewiet de Jonge, general manager, Shanghai, and Robbert Gorris, general manager, Beijing, of the Benelux Chamber of Commerce in China, along with Bofan Wu, publisher of 21st Century Business Review.

Booz & Company


China is regaining its historical position as a global innovation power. The nation that brought the world
such inventions as water-powered
mills, paper money, and explosives is
increasingly viewed as a center of 21stcentury innovation excellence. That said, corporate and government leaders
know that Chinese companies must
move up the value chain for China to
achieve “developed nation” status, and
that the way to do this is by focusing
on new technologies, product offerings,
and services within the country. Local
companies continue to spend massively
on R&D, the government sector is
actively supporting their efforts, and
multinational companies (MNCs) are
making large investments in China as
a laboratory and workshop for global
The China Innovation Survey, now in
its second year, shows that innovators
in mainland China are gaining rapidly
in competitiveness compared with
companies in Europe, United States,

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and other regions. This year, nearly
two-thirds of respondents at MNCs
operating in China said some Chinese
competitors are at least as innovative as
their own companies, a strong increase
since last year. Chinese companies also
said their innovation efforts are competitive with those of MNCs in China, although they still see significant room
for improvement. And though they
believe they are less innovative overseas
than their multinational rivals, they
plan to increase the amount of their
innovation directed toward overseas
markets. The survey also shows that
China is well on its way to becoming a
true global innovation hub for MNCs
from developed markets: Some twothirds of the respondents reported that they are conducting R&D in China for
foreign markets—and even more plan
to do so in the future.
In addition, the survey contradicts a
piece of conventional wisdom: that
innovation in China tends to focus
on copying and making incremental
improvements to existing products. In
fact, the data shows that Chinese companies—to a higher degree than most global competitors—pursue the same
kind of innovation strategies that are
practiced by the world’s most successful
innovators, notably companies based in
Silicon Valley. These companies pursue

Need Seeker strategies, as we will show
below: focusing their R&D efforts on
consumer needs, developing products
that meet those needs, and then quickly
getting the products to market. The
challenge for Chinese innovators going
forward will be to preserve and build
on this model as they grow domestically and internationally. For MNCs in China, the challenge will be to integrate
innovation in China into their established global innovation models. Finally, this year, for the first time, we
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