Innovating companies severely hindered by systematic drag factors

By Xu Jun Source:Global Times Published: 2012-8-26 22:10:03

A technological innovation system, taking enterprises as its driver, the market as its direction and combining events across industry, education, and research, hasn't been established yet in China.

Despite a growth in investment for scientific research and technological advancements, as well as remarkable R&D outcomes, most enterprises still suffer from a lack of innovation, except for a few such as ZTE Corporation and Huawei Technologies. I believe there are several reasons for this.

First, social culture constrains innovation. Innovation is a risky undertaking while failure is a necessary factor to consider. The US for example, is full of adventure.
A large portion of landmark modern inventions came from the US. Japanese culture is full of the spirit of learning. They are constantly improving their products. However, the social atmosphere in China has too much respect for authority. Chinese people prefer to obey orders. They care a lot about face and fear failure. They pay more attention to results than to the process.

This is shown in the operating conditions of companies. Some pursue profits at all costs, by fair means or foul. They flout the laws and defy the rules. Therefore, it is very difficult for these enterprises to innovate.

Second, GDP-oriented enterprise evaluation influences innovation. Leaders of SOEs are entrepreneurs and officials at the same time. The State-owned Assets Supervision and Administration Commission's evaluation of these enterprises pays too much attention to GDP and the speed of development. It emphasizes productivity and market share.

As a result, the proportion of R&D for technology is too low, and company executives tend to have an impetuous attitude toward seeking short-term successes and quick profits. All these explain why there's no breakthrough innovation in China.

Third, improper management leads to a lack of innovation. An idealized model of the innovation sees the combination of industry, education, and research.

However, because of the serious shortage of social capital and loss of credibility in China, industry, education, and research are difficult to bring together in an innovative setting. Weak protection of intellectual property rights has also lead to innovation coming at a high risk.

The causes outlined above affect one another. We should seek both temporary and permanent solutions. Only through comprehensive treatment can we effectively resolve these problems.

Construction of the systemic environment needs to be strengthened. System innovation is the foundation of technological innovation. We should establish a real modern enterprise system, meaning the establishment of boards of directors and hiring professional executive teams for SOEs.

Furthermore, our land, fiscal, financial and taxation systems should be designed and developed to target innovations.

A better management environment is also urgently needed. For instance, some enterprises located in high-tech parks are not high-tech enterprises.

Some high-tech enterprises which do not produce high-tech products can enjoy preferential policy only because they use the high-tech appellation.

Some regulatory authorities just take a laissez-faire attitude toward such situations. Consequently, real high-tech enterprises find no support or protection.

We must enact and strictly enforce administrative regulations, so as to provide firm protection and support for innovative firms.

What's equally indispensable is a more tolerant social environment. The key factor for innovation in enterprises is talents. And innovative talents require material and psychological encouragement.

Society should not judge people by their successes or failures. Public opinions should not only encourage innovation and risk-taking, but also tolerate failure.

We need to form a cultural atmosphere of supporting innovation which is fostered by all of society, just like the culture of "going into business" in the 1980s and 1990s which encouraged entrepreneurship.

The author is an official in the Chinese Ministry of Science and Technology.

Posted in: Viewpoint

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