Faculty & Research
Faculty & Research
Innovation in Emerging Markets: The case of China
From left: Prof. George Yip & Visiting Professor Bruce McKern
Chinese companies have long had the reputation of being imitators. However, new research by Co-Director of the CEIBS Centre on China Innovation, Professor of Strategy George Yip and Visiting Professor of International Business Bruce McKern shows that Chinese companies are finding it increasingly necessary to innovate. As China moves from imitation to innovation, multinational companies (MNCs) must develop strategies for conducting R&D activities in China to ensure they evolve with the market.
In their paper, Professors Yip and McKern explain the many attractive characteristics of the China market which stimulate innovation and pose significant difficulties for MNCs. These characteristics include:
- Large number of relatively low-cost engineers and scientists, and an increasing number of returning Chinese scientists who have been trained at top Western universities;
- Government support for innovation, through infrastructure, education, science parks, and direct grants for research and investment;
- Strong entrepreneurial spirit of the post-reform generation;
- A large and rapidly growing market that makes it easy to introduce new products and services, is much more forgiving of innovation failures, and makes experimentation less risky;
- Empty market spaces and little heritage in terms of customer habits in many sectors; in some industries China is exploiting its latecomer advantage to create leapfrog innovations;
- Chinese companies have a superior understanding of the niches in Chinese markets which enables them to use a range of innovations to address this ‘good enough for China’ market;
- Fast-moving, large scale government projects such as high speed rail and airports which drive many opportunities for innovation.
MNCs have substantially increased their investment in R&D centres in China over the past several years, and Professors Yip & McKern also explain in their paper how they are evolving their R&D activities in China from technical support for local operations through developing products specifically for the China market to using China as an innovation springboard for global markets.
The paper is entitled “Innovation in Emerging Markets – the Case of China”. It was published by the International Journal of Emerging Markets and selected by the journal's editorial team as a Highly Commended Paper of 2014.Professors Yip and McKern will publish a book on their research into innovation in China in March 2016.
