The Ties that Bind: The Chinese Misunderstanding of Innovation

Will China ever become a truly innovative economy? This is a question that bedevils Western observers. From our view, it’s difficult to predict if the autocratic nature of Chinese capitalism will make it easier or harder for the country to embrace new technologies and abandon old ones. A recent article in the Harvard Business Review argues that Chinese innovation will wane because the country’s higher education system is too tightly controlled by Beijing. “The governance structures of China’s state-owned universities”, it concludes, leaves “too many decisions to too few, too self-important, people.”

The restrictions that hinder innovation lie not only in the system of higher education but permeate deeply into the Chinese economy. They are the ties that bind. They create a constrained environment for Chinese engineers, an environment that would be unacceptable to their peers in other industrialized countries. They limit innovation by favoring ideas that emphasize stability rather than transformation. You find this atmosphere in universities, of course, but it is also prevalent in laboratories, offices, and engineering professional societies.

Restrictions at the University

It is easy to find evidence of the restrictions on Chinese engineers in universities. At every university department, you can find three offices in a tight cluster. The first of these offices are those of the department chair and the department administrators. The last is that of the representative of the Chinese Communist Party.

The party representative is usually a member of the department, though often other engineers will claim that the faculty member joined the party to advance their career and get a better office. The representative of the party does not lead the department in a traditional sense. Other faculty regularly question the ideas presented by the party member. However, the party representative does convey the policy of the party and pushes the department to follow those ideas.

Chilling Innovation at Professional Organizations

The influence of the party is seen in other institutions, such as professional societies for engineers. On the surface, these institutions are organized just like their American or European counterparts, with a structure of volunteers, and an elected president, and a board of directors. In contrast to similar organizations in the West, thirty to forty percent of the board are party members and are present to remind the board of the goals of the Chinese Communist Party.

Party members simplify and focus discussions, though such focus may limit their ability to explore new ideas. I have seen party members decisively end a rambling discussion with the curt phrase, “The Party would not be interested.” The discussion involved a well–meaning but largely impracticable idea of one member. An American or European institution would have tolerated the conversation, even though it may have proven to be a waste of time. But, Western professional organizations are willing to tolerate such discussions on the grounds that some of them may ultimately lead to a productive idea.

Limited Faith in Market-Based Solutions

The members of these boards often inquire about how Americans resolve competition between competing products. When they hear that the market chooses the winners, they tend to express disbelief. They point to the market surveys, product roadmaps, and the other studies that are used by American managers to make decisions without ever taking potential products to the market. To them, they are evidence of a directed American industrial policy.  Such discussions suggest a limited understanding of market economies and market-based innovation. For China to transform into a truly innovative economy it must overcome these misconceptions that limit it’s technical leadership.