Moving China Up the Value Chain

A new book, Run of the Red Queen, argues that China would be better served by playing to its strengths in innovation through refinement than by continuing to chase the global lead in flashier breakthroughs. The New York Times interviews the authors:

China’s companies are extremely efficient at creating new versions, often simpler, cheaper and more efficient, of technologies and products shortly after they are invented and marketed elsewhere in the world. For instance, I can’t think of any company in the world that can have over 200,000 people in one location producing a wide array of electronic gadgets for multiple companies other than Foxconn in China.

The American military, the best fighting machine in the world, can hardly move 200,000 people into the exact locations it wants them in months, but this company moves engineers and production workers from line to line and product to product with amazing efficiency. This is production innovation. China does innovate.

In novel-product innovation, China is very weak. There’s no way around it. The central government is the main antagonist in the process. The political economic institutions and system in China make it so entrepreneurs can’t make profit by developing novel innovation. But this same system makes process and second-generation innovation very profitable and successful.

For more on China’s current path, see China Aims to Renew Status as Scientific Superpower, via CDT.