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Here’s a trivia question: what was Qian Xuesen famous for?

Qian was the father of China’s space program.  A brilliant Caltech- and MIT- educated aeronautical engineer, he left the US to return to China, disillusioned with growing American anti-communist feeling.  He is said to have eventually become committed to Chinese nationalistic causes, in some measure out of revenge against the US. 

In my opinion, he is an example why nationalism should be taken out of the innovation equation.

I am all for encouraging expenditure by Chinese firms on R&D and innovation. I wholeheartedly endorse China’s recent drive to increase local innovation, because for one thing that should translate into the more strenuous enforcement of China’s IP laws.

But I am beginning to find real fault with this term “indigenous innovation”.  Specifically, I object to it being employed as the basis for a nationalistic tool, especially since this seems to be happening at the expense of technological and commercial sense. 

At the China Law Blog, Dan Harris identified a trend he has spotted, namely a regulatory shift in China when it comes to approving overseas investment.  Official subscription to the idea of “indigenous innovation” seems to be playing a part in this shift by discouraging foreign technology transfer, in the belief that the technology should not be paid for and should instead be developed entirely locally.

This is a short-sighted approach and, from an economic standpoint, highly inefficient.  Confusing broader economic interest with patriotic interests benefits no-one. 

I enjoy new buzzwords as much as the next geek, but there are several reasons why I am against “indigenous innovation” as a sledgehammer approach in China’s foreign investment policy:

1. China still stands to gain much from the adoption of foreign technology.  This is a phase in the maturation of the market that has not been fully played out.   Acknowledging and embracing competitive advantage between trading partners ultimately leads to greater productivity all round (Trade Economics 101 here).  There should not be any national shame associated with the idea that foreign technology is, in some cases, superior.  No one country can be the most efficient in all areas. 
2. Duplicating efforts in developing a technology from scratch is usually not cost-effective.  I am in no way advocating a lax attitude to IPR, but the Chinese party usually needs to spend only enough to gain a right to use the fundamental technology, and then utilise its advantages in labour costs, production scale, local distribution networks, knowledge of the local market etc.  to develop it.
3. Trying to develop a local version can result in an inferior product and costly delays.  In the telecommunications field, China developed its own 3G mobile telecommunication standard TD-SCDMA to compete with W-CDMA. The various problems with the new standard delayed the award of China’s 3G licences to Chinese mobile carriers and resulted in a diversion of significant funds to a cause that was not strictly necessary, except from the perspective of shoring up nationalistic interests.  It also hasn”t exactly been a boon to China Mobile who has the TD-SCDMA licence. 
4. A far more efficient and enriching policy is that of internationalisation and localisation, or glocalisation, which involves taking a particular product or technology and adapting it for the local market.   It can sometimes result in the glocalised product itself contributing to wider know-how.
5. Really fine, truly novel innovations grow in a culture that encourages the highly original, one that say stokes the imagination of a übermensch type, like a Steve Jobs or Richard Branson. This is not currently China’s great strength in terms of innovation development. China’s advantages include a labour force growing in ability, sophistication and higher education and the ability to commit capital and labour resources to R&D facilities.

There is no reason why China should avoid nurturing homegrown innovation, since this is a long-term goal that will be of immense benefit to it. But it needs to do so without overlooking suitable opportunities to import technology, i.e. the ones that would turn out cheaper and more useful in the end to, simply, buy.

As for Qian Xuesen, a patriot might argue that it was nationalistic feeling that led to Qian’s remarkable contribution to China; therefore nationalism is a useful tool.  I’d remark that the technology he initially applied was fundamentally American.

As an additional footnote, today, the Americans are suspending their space program because they can no longer afford it.  It’s just too expensive and there are greater demands on the government purse.  Any practical future developments in this area will therefore be in the hands of the Chinese and the Indians, who are still able to devote resources to this endeavour.