China taking the innovation game to the West
Dan Steinbock says emerging Asia, led by China, may soon leapfrog the West and Japan in the innovation race, judging by both the number of patents filed and R&D spending
If, just half a decade ago, you had asked leading senior executives in the United States, Western Europe or Japan how they intended to cope with the rise of China, you would have got a familiar response: "We shall move higher in the value-added chain."
Perhaps China was the "world's factory", but the conventional wisdom reassuringly said, "Cheap manufacturing may migrate to China - but innovation will remain in the advanced economies."
Well, the conventional wisdom is a myth. From Huawei and Lenovo to Haier, the most sophisticated multinationals in China have been converting their cost advantages to more sustainable competitive advantages since the late 1990s - often by innovation.
Today, prosperity is seen to be based on productivity, which rests on innovation. In turn, innovation is often measured by input indicators, such as research and development, and output indicators, such as patents. These indicators are crude but they can reflect significant trends.
Throughout the 1950s and 1960s, the US set the standards for prosperity, productivity and innovation. It enjoyed superior leadership in science and technology, R&D and patents.
After the second world war, the economies of Europe's leading nations and Japan were too devastated to pose a competitive threat to US multinationals, which were barely exposed to international competition.