COMPLEMENTARY OPPORTUNITIES IN CHINA AND INDIA

By Associate Professor of International Business and Strategy Shameen Prashantham

My research on dancing with gorillas – how startups partner meaningfully with large multinationals – in India and China, suggests that highly innovative startups in these vast emerging markets, have more opportunities to create value for themselves and their stakeholders than ever before.

My research over the past four years in both China and India suggests that there are complementary but distinct opportunities that entrepreneurs can fruitfully pursue. Notably, China offers a large domestic market with technologies and (more importantly) business models that are arguably a bit ahead of what’s available in India, in large part because of the greater penetration of smartphone and Internet adoption. An impressive Beijing-based startup I recently studied, Testin, has achieved a $500 million valuation largely by focusing on the domestic market. A member of IBM’s Global Entrepreneurship Program (GEP), it does work closely with of number of multinationals, but its business is exclusively in China. By contrast, India’s much greater English skills means that an international orientation comes fairly naturally to many Indian entrepreneurs I’ve met. A case in point is the impressive Bangalore-based venture, Stelae Technologies, which has a multi-cultural founder team and took on the best startups in the world to finish runners-up in the 2015 SmartCamp competition, which is part of IBM’s GEP. Part of its appeal is its success in both emerging and advanced markets.

Examples such as Testin and Stelae are symptomatic of the widespread upsurge in entrepreneurship in China and India, albeit with contrasting drivers. In China, as ever, the direction and pace of the agenda are being set at the very top, with plenty of local variation in terms of how Premier Li Keqiang’s mass entrepreneurship policy is implemented on the ground. And China’s scale of entrepreneurship is considerable; to illustrate, my colleague Prof Rama Velamuri’s analysis of corporate venture capital in China and India indicates that there were more deals involving more multinationals as sources of investment in the former compared to the latter[i]. In India, private sector initiatives matter greatly, for instance the 10,000 startup initiative of Nasscom, the Indian trade body for software. However, India too is witnessing national policy efforts such as the Startup India campaign. If such efforts genuinely gather momentum, then other attractive opportunities for entrepreneurs will also emerge in India.

Over time, it seems likely that Indian and Chinese entrepreneurs will exhibit more and more interest in each other’s markets. But there is much work to be done to facilitate these links. As I pointed out in an article last year, following the visit of India’s Prime Minister Narendra Modi to China, flight connectivity between the two countries is poor; it amazes me there are many options to fly direct to Heathrow from Shanghai or Mumbai and none between these two great commercial cities of Asia! But surely this will change in the not too distant future, given the growing interest in India among Chinese businesses – undoubtedly more than when I first came to China five years ago. To illustrate, I have learned that Suntek, a venture in southern China started by a CEIBS EMBA alumnus, is actively pursuing opportunities in India. I heard other similar stories from an Indian CEIBS MBA alumnus, KS Raghuram, in Bangalore recently. People like him are in a unique opportunity to act as a bridge between these two great – yet vastly different – markets. But it’s not for the faint-hearted.

Shameen Prashantham is Associate Professor of International Business and Strategy at China Europe International Business School (CEIBS). His research and teaching interests relate to international entrepreneurship and strategy (related video).  His research was also recently published in the Indian business journal Business Today.