Hong Kong should turn its creativity into a new engine of growth

Janet Pau studies the obstacles holding it back in race for tech start-ups

PUBLISHED : Friday, 29 May, 2015, 10:58am
UPDATED : Friday, 29 May, 2015, 10:58am

Hong Kong's unseating as the most competitive Chinese city and missed opportunities in the technology sector, notably the failure to support the headquarters of the world's biggest civilian-drone maker DJI, have led to widespread reflection over the city's future position as a place for innovation and entrepreneurship. Hong Kong must not only compete with other Chinese cities, but in a global race for technology start-ups.

Technology start-ups can become an engine of economic growth and job creation. Silicon Valley, for one, is acknowledged for its contribution to the US economy. In Hong Kong, start-ups account for well under 1 per cent of the city's gross domestic product. Employment estimates range from several thousand at registered start-ups to 11,000 at the Science Park, out of a workforce of four million. Start-up venture funding remains miniscule relative to that of other Asian cities.

Hong Kong provides rich soil for idea generation, with its diverse population, high-speed technology infrastructure and reliable intellectual property regime.

However, for the city to become a world-class start-up hub, it must overcome two big obstacles - market size limitations and weak support from established industry.

In order to generate jobs and have an economic impact, Hong Kong start-ups must compete in global, regional and the mainland Chinese markets. To do so, they must make their businesses work despite differences in culture, distribution networks and customer behaviour. In China, successful start-ups must adopt "internet thinking", referring to the cutthroat, winner-takes-all, and execution-driven culture of the Chinese start-up world.

Only those who can rethink market solutions and ensure customer adoption quickly enough can survive. It is essential for Hong Kong entrepreneurs to find strategic ways to work with mainland Chinese counterparts, who have complementary strengths such as prototype manufacturing and first-hand market knowledge.

Hong Kong also lacks established industry to support a pipeline of future technology talent, with practically no world-class technology companies active in a big way here. As a result, young entrepreneurs lack the training ground in developing successful products and business models.

Such experience is valuable, as many founders of successful Asian start-ups have worked at world-class technology companies at home or overseas prior to becoming entrepreneurs. Hong Kong needs to invest in upgrading its start-up talent, either through attracting world-class companies to come or finding training opportunities abroad.

Hong Kong's fellow Asian Tiger economies have made significant steps to bolster their competitiveness in large markets. South Korean technology giants are already globally competitive, and Google just set up its first Asian start-up incubator in Seoul. Singapore has launched its "Smart Nation" initiative and transplanted part of its Block 71 start-up ecosystem to San Francisco. Taiwan has long invested in hardware manufacturing and is moving to hardware innovation. Other global competitors include Tel Aviv, whose innovative start-ups and university-based incubators have attracted substantial venture funding from Silicon Valley and around Asia.

Hong Kong's education system needs to better reward collaboration and risk-taking rather than conformity. As other economies move towards embracing adaptive learning and interdisciplinary problem-solving, to better equip their young, students caught up in Hong Kong's achievement-obsessed education culture are in danger of competing in a race to nowhere.

As a high-density city with sophisticated and diverse populations, Hong Kong can be an ideal hub for developing and testing innovations such as urban sustainability technologies and high-bandwidth mobile technologies. But it must address fundamental obstacles to compete in an increasingly crowded global race, so that start-ups can grow into businesses that bring broader economic benefits.

Janet Pau is co-author of Through the Eyes of Tiger Cubs: Views of Asia's Next Generation and programme director of the Asia Business Council