When is Innovation Indigenous

In the Hutong
Charging my iPods
1755 hrs.

Yesterday, I had the privilege of being a fly on the wall at a small lunch attended by representatives of some large US companies and a respected university professor who advises the government on issues pertaining to the information technology industries.

As is inevitable at such meetings these days, the question of China’s “independent innovation” came up in several contexts. Searching for a lever to try to draw the government into interpreting independent innovation in a manner that allows for some level of foreign participation, one of the corporate reps asked the distinguished professor how he felt the government might view the innovation that would take place in an R&D facility owned by a Chinese company but taking place in, say, Silicon Valley.

The discussion got really interesting, and it basically condenses down to one point:

The Chinese government is not interested in legislating on the basis of establishing a principle, taking into account hypothetical problems that might arise in the future (an approach that stands opposed to the Talmudic traditions at least, and probably those of Justinian, English Common Law, and the Napoleonic code). Indeed, the nation’s bureaucrats and policy makers are far more interested in using the law as a tool to serve near-term policy goals, rather than use law to build a system that will withstand the test of history. (Hence the old saw “rule by law, rather than rule of law.”)

When it DOES get to the point where Chinese companies are setting up R&D centers in other countries at a rate approaching that at which multinationals are establishing them in China now, THEN the Chinese government will deal with the question of whether that is independent innovation or not. They’ll just change the law.

(Or perhaps, as some policy makers appear to believe, by the time we get to that point, the whole issue of “independent innovation” will be a distant memory. I wouldn’t bet against that.)

This is another one of those critical differences in viewpoint between the two cultures. In the west, policy and government action occur with the framework of law. In China, the law occurs within the framework of policy and government action.

Is the law important in China? Absolutely, and getting more so over time.

But pay attention to policy. Those will tell you how the laws will be interpreted and acted upon.