Learning from China and Indigenous Innovation 224.0

In China, they have a saying, “one cannot step into the same river twice.”

Lu Qiwen first wrote about the China brand of national innovation systems, Indigenous Innovation, in China’s Leap into the Information Age: Innovation and Organization in the Computer Industry (Oxford, 2000).

It seems, that the mode of national innovation system as described cannot repeat itself in China or elsewhere though there is much to emulate in the generic strategy.

National Innovation System. Using SYNTHESiST’s model based on Bengt Ake Lundvall among others, the components of indigenous innovation of China are:

STI-Learning. From the science and technology infrastructure, it was built, one-off, on the accumulated knowledge from decades of research done in government-funded institutes, research universities and laboratories (and notably the China Academy of Sciences) that was effectively privatized for free.

From the 1980s, these public goods were first privatized as kernels for profit-oriented enterprises. Much later, this source of free research was closed with a change in policy.

DUI-learning. The internal market of China was the starting point for competence building through learning by doing (up the experience curve), using and interacting.

Social Innovation. Peter Drucker emphasized that social innovation were just as important as technological ones in human development.

Most notable was the social innovation component that Professor Lu described in China’s transition.

The transition from collective ownership described to professional management that he described as “state-owned, non-government managed” and finally to join-stock corporations is inspiring and instructional but may not occur in non-communist states.

The Chinese mode of indigenous innovation, cognizant of its communist roots and pretty much different from the American version, had a strong element of collective ownership and sharing. At the very least, it shows that innovation can be encouraged with schemes other than individual incentives and in different cultural settings.

Even then, this transition step is one off. Once the change was made, the water has flowed through and it is now a different river than one steps into.

Roots of Indigenous Innovation for China. Still, there are learnings to be made.

The indigenous component in all four cases mentioned was in the specific technology related to computerized of Chinese writing in the areas of dot-matrix printing, word processing, e-publishing and a PC with integrated Chinese word processing where the Mainland Chinese had a unique advantage.

Unlike the Taiwanese who found rich pickings in exporting to the wider world, Mainland Chinese had less access to adapt to English computers such that the huge internal market for the four indigenous innovations provided fertile ground.

Learning for the Philippines. While there are only 100 million Filipinos, it still represents a big enough demand to jump start market entry in a manner that is difficult for foreign competitors to get into.

In similar vein as China’s indigenous innovation based on a unique local parameter of the Chinese language, imagine a technology-enabled mass distribution built around the sari-sari store. Or maybe, sweetish banana ketchup becoming the dip of choice for fried chicken worldwide. Or adobo becoming as famous as toom yam goong. Or Chickenjoy fighting toe-to-toe with KFC’s breaded chicken in the world market.

Back to China and Indigenous Innovation. Unlike Korea or Taiwan national innovation systems, Chinese innovation in information space did not lead with low labor cost assembly of Western products.

According to Professor Lu, indigenous innovation went beyond reverse engineering to re-engineering in that it involved “a process that add new technological functions to imported products and tailors them to local conditions.”

For the four cases in his book, the new technological functions involved adapting the imported computer to hand the Chinese ideographs in computerization, printing and publishing.

Subsequently, by attaining dominance in this unique niche in a big local market in China, the four companies were able to capture much of the bigger export markets.

Later, with labor cost arbitrage, the four Chinese companies backward integrated into component technologies like semiconductors and moved forward into systems integration to become leading players in the world.

One of the four companies in Professor Lu Qiwen’s book, Legend who first made its mark in dot-matrix printing of Chinese characters, eventually bought out IBM ThinkPad computers and re-branded itself as Lenovo.

Possibilities for Indigenous Innovation in the Philippines. Unfortunately for the Philippines, we do not have a strong public science and technology infrastructure like China had to support its mission-critical objectives like military weapons and space program.

We do have unique strengths especially in enabler technologies like mobile computing and communications. Our leading firms like PLDT, Globe, and Digitel can leverage this specific knowhow to strengthen winning sectors.

Likewise, unfortunately, we have hollowed out our industry by not treating the ‘temporary’ OFW strategy like a resource and sterilizing inward remittances. Labor cost became uncompetitive even as the main desire became to work overseas rather than in Philippine industry.

Our winning sectors are more in services than in industry like medical care, ship manning, and business process outsourcing.

Possibly, we can forge forward in new fields like tele-medicine and remote ship crewing as our contribution to the brave new world of indigenous innovation.

Note: Professor Lu Qiwen died just as his book, that was based on his dissertation at Harvard, was accepted for publication. A big loss to China and the innovation community.