China challenger to US technological leadership; talent gap persists, entrepreneurship expert says

Source:Global Times Published: 2017/2/15 22:13:40

Brent Goldfarb Photo: Courtesy of Brent Goldfarb

Brent Goldfarb Photo: Courtesy of Brent Goldfarb

Editor's Note:

The Chinese government has grand ambitions for the country's technology sector. It has said that by 2020, five industries each worth 10 trillion yuan ($1.46 trillion) are to be created. The five sectors are new-generation information technologies, advanced manufacturing, biology, green and low-carbon industries, and the digital creative industry. On Wednesday, the Global Times' Chu Daye (GT) talked with Brent Goldfarb (Goldfarb), associate professor of entrepreneurship and strategy at the University of Maryland in the US, on the environment faced by China's technology companies and the gap with their US counterparts. Goldfarb is an observer of the technology communities in both countries.

GT: What is the most notable thing about China's entrepreneurship and industrial innovation that you noticed in 2016?

Goldfarb: The most notable thing was the effort by the Chinese government to encourage high-technology entrepreneurship. The Chinese government has historically coordinated large parks like the Z-Park in Beijing, but is now doubling down with opening incubators across the country and setting up government guidance funds. High-level officials lionize entrepreneurship and innovation. This coincides with real opportunities in the O2O [online to offline] sector, virtual reality and cloud computing spaces. The risk is that this could lead or perhaps has led to a bubble as entrepreneurship becomes cheaper vis-a-vis employment in larger companies and novices enter the ecosystem.

GT: What is the status of cooperation and communication between Chinese and US technology and entrepreneur communities? Will the Trump administration speed up or delay that process?

Goldfarb: In general, there are very strong ties between Chinese and US technology sectors. This has been greatly enhanced by the pursuit of opportunities by US venture capitalists and the work of the Chinese expatriate community in the US and returnees in China. It is hard to see how the Trump administration's aggressive anti-immigration policies will do anything but slow this down - a fact that does not bode well for the sectors in the US or China.

GT: Do you believe that more Chinese companies will start to challenge the supremacy of US technology companies?

Goldfarb: Of course that will happen - in a sense it already has - as you've articulated a pretty low bar. The US lacks some manufacturing capabilities that China has: Producing products such as the iPhone in the US is problematic not just because of wages, but because the know-how is no longer easily accessible in the US. China already is a leader in the solar sector. Chinese cellphones are advanced - and not really that much different than the iPhone in terms of quality (if not branding).

However, US technological leadership is often associated with knowledge stemming from US universities. For example, Stanford alone has produced founders of 51 unicorns (companies with valuations greater than $1 billion), Harvard 37. The University of California system, MIT, Penn and Cornell have produced 36 more. This includes students coming from universities, such as the founder of Facebook, but also technologies such as Backrub, which was developed by students together with a professor, or networking technology developed by the Stanford professors behind Cisco, or VMWare.

Chinese universities are very good, but top talent still flows to US institutions. There are many more Chinese nationals working in US institutions than there are Westerners working in Chinese institutions. And while it is true that President Trump's policies threaten the leadership positions of US universities, I expect the primary beneficiary of this will be Canada.

GT: How do you view the performance of Chinese technology companies listed in the US market?

Goldfarb: There are more than 200 such companies, so this is a broad group. This group tends to be the best Chinese firms. Also, companies backed by foreign venture capital firms need to be listed outside of China due to their regulatory structures. The mechanism for listing abroad is straightforward and transparent - and this will attract companies that are relatively well run and transparent. In general, due to higher regulatory scrutiny than in China, these companies will be less likely to rely on informal mechanisms to compete in markets.

Posted in: COMPANIES

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