Four ways for Hong Kong to become a leader in technology, instead of always playing catch-up

In this more competitive second decade of the 21st century, there is a growing understanding across countries that technology and innovation are vital drivers of economic growth and higher living standards. Many believe Hong Kong risks falling behind because so few companies here foster innovation or are technology-oriented.

Hong Kong’s economy remains reliant on its traditional pillar industries of retail, property, financial services and shipping. Most of us spend similar amounts of time in grocery stores, banks and shopping malls as we did last century.

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In contrast, consumers in mainland China have embraced a digital life, using e-commerce, e-banking and social media to satisfy their daily needs. The central and local governments have invested in research and development directly and offered generous incentives to companies that develop and pursue innovation. Meanwhile, countless aspiring entrepreneurs have left their companies or schools to join start-ups that build new and better business models. Thus, China is witnessing an explosion of activity in the new economy, with many companies valued at over US$1 billion in the private or public market.

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A commonly cited factor for dismissing Hong Kong’s prospects to become an innovation hub is its small population. The fallacy of this is easily demonstrated: Israel, with a population of 8 million, is a global technology leader that has more listed companies on the tech-heavy NASDAQ than any other foreign country, except China, and attracts more venture capital than the entire continent of Europe.

Closer to home, Singapore is Asia’s most innovative economy, with successful homegrown companies operating in e-commerce and the biotechnology and financial technology sectors, despite having a smaller population than Hong Kong. Other countries similar in population size to Hong Kong, like Sweden and Finland, also compete globally, underscoring that size is not an impediment to economic advancement.

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Rather than population, I believe the critical factor for a successful innovation hub is having a robust network of experienced and motivated intellectual talent. Typically, ecosystems of innovation develop organically as outgrowths from research universities such as MIT or Stanford, cutting-edge government-sponsored institutions like the Israel Defence Forces, and world-class corporate research development programmes sponsored by tech-heavy firms such as Bell Labs, Intel and Google. Such institutions have the mission statement and financial power to expend major resources attracting and retaining the best talent while providing them with the freedom and funding needed to develop groundbreaking innovations.

Over time, some of these creative people become entrepreneurs. Other businesspeople move to these areas to get involved. And, often, the same research and development institutions collaborate with the start-up community to create and commercialise products. The result is an ecosystem that helps to shift the productivity and value curve for businesses and consumers, powering growth and job creation.