Business Enterprise and Innovation in China
The 21st century has been called “The Century of Asia” with China clearly leading the pack. One of the driving forces behind China’s economic success to date has been the country’s ability to respond to an increasingly globalized and competitive marketplace through innovation and hard work. Although a hard work ethic has been a formative ingredient in contributing to China’s success to date, there have been some mixed results when it comes to developing and promoting technological innovations. On the one hand, China has succeeded brilliantly where many other countries have failed in transitioning from its former state-owned enterprise economy to a free market economy. On the other hand, though, the Chinese “old guard” continues to pursue economic developmental initiatives in ways that can stifle innovative developments. To identify the salient features of the business environment that are most likely to impact on China’s innovation activities, which industries will likely be involved, and the major obstacles that remain in place, this paper provides a review of the relevant literature, followed by a summary of the research and important findings in the conclusion.
Review and Analysis
Background and Overview
While no one can predict when an innovative concept will strike, what is known is that innovative practices are essential to achieving a competitive advantage in an increasingly globalized marketplace (Lin & Lin 2010). Given its spectacular economic growth in recent years, many observers might believe China has placed a high value on innovation to help fuel its economic development, but this view is only partially correct. In this regard, for the past 4 decades, China in fact succeeded in transitioning itself from a closed, centrally planned economy to a free market system that is playing an increasingly important role in the global marketplace, with China becoming the world’s largest exporter in 2010 (China 2011). The reforms that were implemented by the Chinese government to achieve this transition have been cited as being responsible in large part for the ability of Chinese firms to innovate where other countries have failed. For example, Gu (1999) reports that a number of features of the Chinese reform programs have facilitated innovative practices in Chinese industries in sharp contrast to the experiences of the former Soviet republics in Eastern and Central Europe.
This relentless economic growth, though, has not always been based on innovation but has rather been the result of ongoing oversight, and in some cases interference, with the private sector and even a reversion to some previous state-controlled policies (China 2011). For instance, according to U.S. government analysts, in some cases, the Chinese leadership has considered it in their best interests to nationalize certain industries as being essential to the country’s economic security (China 2011).
Despite such minor political backsliding, China’s performance over the past 30 years has truly been impressive. In this regard, U.S. analysts add that the series of reforms implemented by the Chinese government have had an impressive effect on GDP growth which has increased by more than 1000% since 1978 (China 2001). In fact, by 2010, China had become the second-largest economy in the world after the United States when measured on a purchasing power parity basis (China 2011). As a result of these gains, Chinese industrial and agricultural output surpasses the United States but per capita income remains lower than the world average (China 2011).
Recently, an increase in the Chinese domestic demand has also created an increased demand for imports which grew by 6.2% during the third quarter 2009; furthermore, new jobs have been created, primarily in the service, construction, and public sectors while employment in the export sectors has declined somewhat, a sign of the transition from a strictly export-oriented economy as well as the growing economic clout of the Chinese middle class (China quarterly update 2009). Nevertheless, China’s exports continued to experience strong growth as well based in part on the increasing competitiveness of the country’s manufacturing industry (China quarterly update 2009).
The Chinese government’s most recent Five-Year Plan (March 2011) stresses the need to target the country’s domestic markets in order to reduce reliance on exports but analysts expect only moderate success in achieving these ambitious goals by the end of the year (China 2011). In this regard, U.S. analysts predict that the Chinese economy is well situated to continue impressive growth in the coming years, and the Chinese government had pledged to continue its drive to increase domestic consumption to wean the economy off of its current export base.
China’s gross national income (constant LCU) in trillions for the period 1991 through 2010 is shown in Figure 1 below.
Figure 1. Chinese Gross National Income (constant LCU) (in trillions)
Source: Based on tabular data at http://search.worldbank.org/all?qterm=chinaconstantprices
Innovative Industries in China
Currently, there are signs that the most innovative industries in China are those that have a proven track record of success to build upon, including the life sciences, nanotechnology, high-speed computing and communications as well as fuel cell technology, among others (Simon 2009). Indeed, the younger generation of Chinese professionals who is taking the mantle of leadership today will become the innovators of tomorrow based on their recognition and appreciation of industry best practices, wherever they may be found (Simon 2009). In this regard, Simon emphasizes that, “Members of this talent community, large numbers of whom will have spent time abroad for work and/or education, will represent the cutting edge of an emerging wave of Chinese technological entrepreneurs who will help to redefine the operating environment for knowledge creation and innovation in China by introducing successful Western practices” (2009, p. 30). This point is also made by Kriz and Keating (2009) who report the current cadre of Chinese students being educated aboard numbers more than 100,000 and these professionals will be well poised to bring newfound innovative practices, generate new patents and become meaningful and productive members of international communities of interest in the future.
The Chinese government has also used international joint ventures as a method to promote innovation through its industries (Cheung 2007). The experiences to date confirm that this approach has proven benefits for all of the stakeholders that are involved. According to Cheung, “In the context of development, multinational enterprises (MNEs) often bring specific advantages such as sophisticated technology, financial resources, manufacturing skills, managerial talents and entrepreneurship when the level of competition in the host country is intense” (p. 228).
In some cases, international joint ventures provide the general framework in which innovation can occur, while in other cases, there are specific contributions that MNEs can make to promote innovation, including the transfer of technologies, and MNEs are more likely to make such transfers when they have a vested interest in the enterprise (Cheung 2007). This approach has been used since 1978 when China’s “open door policy” was promulgated in an effort to attract foreign investments and advanced technologies (Cheung 2007). Notwithstanding China’s enormous pool of talent and other resources, the need for advanced foreign technologies to achieve innovation remained firmly in place throughout the closing years of the 20th century. In this regard, Zhang and Pearce (2010) emphasize that notwithstanding the enormous amounts of underutilized resources that were available to the country, China’s current progress in innovation would not have been possible without advanced technologies from abroad.
One industry in particular appears to have benefited from these open-door policies and which reflect the type of innovation that is most suitable for the emerging Chinese business model. For instance, according to Gao and Damsgaard (2007), “China is the largest mobile telecommunications market in the world, which grows at one of the highest rates in the global scale” (p. 184). These authors, though, are also quick to point out that innovation in the mobile telecommunications market has taken place much differently in China that elsewhere in the world. For example, Gao and Damsgaard also note that, “Constrained by its unique social environment, China’s mobile telecommunications market has innovated in a particular way” (2007, p. 185).
In support of the foregoing assertion, Gao and Damsgaard (2007) report that markets in other countries have transitioned from second generation (2.0) technologies to 2.5 generation (2.5G) to the third and fourth generations (3G and 4G); however, the Chinese government has postponed issuance of even 3G licenses while it waits for the country’s domestic 3G technologies to catch up. This constraint on one avenue of innovation has resulted in yet another innovative approach being used by the Chinese in its stead. For example, Gao and Damsgaard note that, “Interestingly, we instead have seen the success of personal handyphone system (PHS), a cordless telephony technology generally treated as an extension of the fixed network. It is of practical interest to know the characteristics of mobile telecommunications market innovation in China and to disclose the driving forces to it” (Gao & Damsgaard 2007, p. 185). According to Harris and Dennis (2002), the PHS serves as a standard mobile telephone but also features facsimile and video transmission capabilities. In addition, the PHS is capable of sending and receiving email, and fully Internet compatible.
The “driving forces” that are fueling growth in the PHS industry are not unique, but they have been focused on an “innovation process [that] often leads to changes in market structure composed by varied players, and the appearance of novel services in the market” (Gao & Damsgaard 2007, p. 185). Not all industries have shared the positive experiences of the mobile telephone industry in China, though, and a number of obstacles and challenges remain firmly in place that tend to hamper innovative practices in China, and these issues are discussed further below.
Obstacles and Challenges to Innovative Practices
Obstacles and challenges to innovative practices can adversely affect an enterprise’s two fundamental innovative activities, (a) product innovation and (b) process innovation (Lin & Lin 2010). Typically, higher product quality is related to higher production costs, while process innovation attempts to minimize such production costs (Lin & Lin 2010). In either case — and given the enormity of the markets that are involved — even small innovations can result in a huge savings and a solid competitive advantage for Chinese firms (Lin & Lin 2010). There are a number of factors that continue to hamper the innovative process in China, though. Currently, the Chinese government faces numerous general obstacles and challenges, including:
1. Reducing the country’s inordinately excessive domestic savings rate which adversely affects domestic demand;
2. Sustaining adequate job growth for tens of millions of migrants and new entrants to the workforce;
3. Reducing corruption and other economic crimes;
4. Containing environmental damage and social strife related to the economy’s rapid transformation; and,
5. Inflation remains a problem as well as the amount of debt incurred by local governments in their rush to jump on the economic development bandwagon in recent years (China 2011).
In this environment, it is reasonable to suggest that some types of industries will enjoy some advantage over others in terms of their ability to innovate and this has been the case in China in recent years. For example, according to Cliff, “The macroeconomic environment, competition, and factor markets provide mixed incentives for technological innovation in China. Some aspects of the macroeconomic environment stimulate technological development; while others inhibit it” (2001, p. 50).
The Chinese government’s most recent emphasis on promoting the country’s domestic market may in fact also end up backfiring on them despite the efforts of policymakers to maintain stability and continued economic growth. In this regard, Cliff also points out that, “The high economic growth rates China has been experiencing are a major stimulus, as they mean that the market for new or improved products is rapidly expanding. Growth rates have tended to fluctuate greatly, however, and uncertainty about the domestic economy may discourage innovation” (2001, p. 50). Likewise, Cliff (2001) cites the continuing problems with inflation that have defied government intervention that may discourage foreign long-term investment in technology-related initiatives.
Moreover, and although things have definitely changed for the better from just a few years ago (at least from the perspective of foreign investors), some degree of political instability has also discouraged technological innovation in China (Cliff 2001). According to Cliff (2001), foreign investors remain somewhat leery of the Chinese leadership’s commitment to political stability as well as the long-term investments that are needed to bring new innovations to fruition and the global marketplace. In addition, an increasingly competitive marketplace also represents a challenge for the Chinese leadership with respect to the provision of incentives for technological innovation (Suttmeier 1997). Likewise, a number of industries in China already have significant incentives to export their products because this provides them with valuable access to foreign exchange and investments (Cliff 2001). Moreover, China’s accession to the World Trade Organization in 2002 resulted in increased competition for the growing Chinese domestic market (Cliff 2001).
Based on their analysis of innovative practices by service and manufacturing firms in China, Lin and Lin (2010) report that the intensity of research and development (R&D) activities is positively related to innovation resulting in larger numbers of patent applications, but such intensity does not necessarily translate into higher numbers of valid patents. The analysis by Lin and Lin (2010) also showed that smaller manufacturing enterprises and larger service firms are more likely to actively pursue innovation compared to their larger and smaller counterparts, respectively (Lin & Lin 2010). The results of the Lin and Lin (2010) analysis also indicate that many Chinese firms’ innovative activities are primarily hampered by economic and internal factors, and these are being recognized and addressed.
The research showed that China is well situated to build on its recent successes and many economists predict the country will become the leading global economy in the foreseeable future. Driving this economic growth has been a thoughtful (some would say overly cautious) approach to promoting economic development through innovative practices. Although China has much going for it in terms of a growing domestic market and a talented pool of younger professionals who will become the country’s leadership in the years to come, the country is still constrained in its efforts to promote innovative practices as a result of several factors, including an export-dependent economy that is vulnerable to fluctuations in the global economy and massive local government debt that resulted from the rush to modernize its infrastructure.
Despite these obstacles, the research also showed that enterprises in China have taken the initiative to overcome such obstacles and even though innovative practices have proceeded in different ways from elsewhere in the world, innovation continues to drive the Chinese economy in several industries, including mobile telecommunications and other high-tech industries such as nanotechnology, life sciences, high-speed computing as well as fuel cell technologies. In the final analysis, scholars in the 22nd century will likely cite the first decade of the 21st century as the beginning of China’s real economic development based on a free market philosophy where it is indeed “glorious to get rich.”
Cheung, K-Y. (2007). ‘The Impact of Ownership on the Propensity to Innovate in China’s Large — and Medium-Sized Industrial Enterprises.’ China: An International Journal, vol. 5, no. 2,
‘China.’ (2011). CIA World Factbook. [online] available: https://www.cia.gov/library / publications/the-world-factbook/geos/ch.html.
‘China quarterly update.’ (2009, November). World Bank. [online] available: http://site resources.worldbank.org/INTCHINA/Resources/318862-1237238982080/5923417-
Cliff, R. (2001). The Military Potential of China’s Commercial Technology. Santa Monica, CA:
Gao, P. & Damsgaard, J. (2007). ‘A Framework for Understanding Mobile Telecommunications
Market Innovation: a Case of China.’ Journal of Electronic Commerce Research, vol. 8,
no. 3, pp. 184-186.
Gu, S. (1999). China’s Industrial Technology: Market Reform and Organisational Change.
Harris, L. & Dennis, C. (2002). Marketing the E-Business. London: Routledge.
Kriz, A. (2009). ‘Doing Business in China: Tips for an Outsider.’ China Review International, vol. 16, no. 1, pp. 1-3.
Lin, H-L. & Lin, E.S. (2010). ‘FDI, Trade, and Product Innovation: Theory and Evidence.’
Southern Economic Journal, vol. 77, no. 2, pp. 434-437.
Simon, D.F. (2009). ‘China’s Future Have Talent, Will Thrive: Although the Chinese Clearly
Consider the Development of Their Human Resources to Be a Key to Economic
Development, the Details of the Path They Will Follow Remain Uncertain.’ Issues in Science and Technology, vol. 26, no. 1, pp. 29-30.
Suttmeier, R.P. (1997). ‘Emerging Innovation Networks and Changing Strategies for Industrial
Technology in China: Some Observations.’ Technology in Society, vol. 19, no. 3&4,
pp. 305 — 323.
Zhang, S. & Pearce, R. (2010). ‘Sources of Technology and the Strategic Roles of MNE
Subsidiaries in China.’ Multinational Business Review, vol. 18, no. 3, pp. 49-51.
Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?
Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.
Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.
Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.
While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.
Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.
In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.
Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.
We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!
We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.
Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.
We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.
Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.
There is a very low likelihood that you won’t like the paper.
Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.
We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!
We provide professional writing services to help you score straight A’s by submitting custom written assignments that mirror your guidelines.
Get result-oriented writing and never worry about grades anymore. We follow the highest quality standards to make sure that you get perfect assignments.
Our writers have experience in dealing with papers of every educational level. You can surely rely on the expertise of our qualified professionals.
Your deadline is our threshold for success and we take it very seriously. We make sure you receive your papers before your predefined time.
Someone from our customer support team is always here to respond to your questions. So, hit us up if you have got any ambiguity or concern.
Sit back and relax while we help you out with writing your papers. We have an ultimate policy for keeping your personal and order-related details a secret.
We assure you that your document will be thoroughly checked for plagiarism and grammatical errors as we use highly authentic and licit sources.
Still reluctant about placing an order? Our 100% Moneyback Guarantee backs you up on rare occasions where you aren’t satisfied with the writing.
You don’t have to wait for an update for hours; you can track the progress of your order any time you want. We share the status after each step.
Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.
Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.
From brainstorming your paper's outline to perfecting its grammar, we perform every step carefully to make your paper worthy of A grade.
Hire your preferred writer anytime. Simply specify if you want your preferred expert to write your paper and we’ll make that happen.
Get an elaborate and authentic grammar check report with your work to have the grammar goodness sealed in your document.
You can purchase this feature if you want our writers to sum up your paper in the form of a concise and well-articulated summary.
You don’t have to worry about plagiarism anymore. Get a plagiarism report to certify the uniqueness of your work.
Join us for the best experience while seeking writing assistance in your college life. A good grade is all you need to boost up your academic excellence and we are all about it.
We create perfect papers according to the guidelines.
We seamlessly edit out errors from your papers.
We thoroughly read your final draft to identify errors.
Work with ultimate peace of mind because we ensure that your academic work is our responsibility and your grades are a top concern for us!
Dedication. Quality. Commitment. Punctuality
Here is what we have achieved so far. These numbers are evidence that we go the extra mile to make your college journey successful.
We have the most intuitive and minimalistic process so that you can easily place an order. Just follow a few steps to unlock success.
We understand your guidelines first before delivering any writing service. You can discuss your writing needs and we will have them evaluated by our dedicated team.
We write your papers in a standardized way. We complete your work in such a way that it turns out to be a perfect description of your guidelines.
We promise you excellent grades and academic excellence that you always longed for. Our writers stay in touch with you via email.