Demonstrated by innovative clusters like Silicon Valley, the United States continues to be the hub of global innovation. This also is reflected in the fact that 144,621 utility patents were granted to Americans by the U.S. Patent and Trademark Office in 2014. America’s innovative success is partly the result of the country’s acceptance of failure, which is considered part of a normal development process. Unlike China, this attitude encourages risk taking, an essential ingredient in innovation.

The question of whether or not China is an innovator is complex.

The Japanese proverb, “The nail that pops up is always hammered down,” discourages individuals to “go against the grain” or question the process, and instead encourages them to conform to specific norms. As part of Chinese culture, this mindset is seemingly the opposite of the American cultural right to question authority and challenge the system, as in the case of the American Revolutionary War.

“Many people in the West believe that contention and discord lead to breakthroughs, new ideas and innovation. But conflict and disharmony, especially in such serious matters as governance, do not fit the Chinese mentality,” says John Naisbitt, the author of China’s Megatrends. China’s cultural reluctance to challenge the status quo does not encourage home-grown innovation.

The goal of becoming an innovative society cannot be achieved while hierarchical, authoritarian patterns persists in education and in the workplace.

“The goal of becoming an innovative society cannot be achieved while hierarchical, authoritarian patterns persists in education and in the workplace,” Naisbitt remarks. Freedom of inquiry, a Western ideal that has led to independent thinking, is not historically part of the Chinese totalitarian rule. “Modern scientific breakthroughs need people who are willing to question their forefathers’ point of view and their bosses’ orders,” Naisbitt notes. “Hierarchical, authoritarian thinking is China’s highest hurdle in changing from the workshop of the world to a leading innovative country.”

From a cultural perspective, Chinese business failure also often results in “losing face,” which is tantamount to public disgrace. Consequently, it is often repeated that the Chinese would rather do nothing than do something wrong. This mindset also hinders innovation.

My discussion with Chinese students and anecdotal evidence suggests that relative to the population, few students pursue entrepreneurial careers and instead choose positions in state-owned enterprises and government agencies that are considered more secure and connected to the party. In fact, according to Bob Davis, a Wall Street Journal senior editor who covers China, “students at Stanford were seven times as likely as those at the most elite Chinese universities to join startups.”

But Chinese culture is slowly changing.

In The Spotlight

The United Nation’s World Intellectual Property Organization reports that in 2014, the United States filed 61,492 patent applications under the Patent Cooperation Treaty to hold the top spot. The U.S. was followed by Japan at 42,459. Surprising to many, China advanced to third place, at 25,539, above all European countries.

Tim Ebsary, Director of Business Development for American Commercial Strategies, a California-based firm that works closely with Chinese companies, says “where there is capitalism, there is innovation,” and indicates that Chinese innovation is on the rise. Although many Chinese firms are significantly making inroads in innovation, many continue to be dependent on government incentives and the purchasing of new technologies through mergers and acquisitions.

While China currently may not be considered an innovator in the strict sense of the word, its business community certainly knows how to adapt existing technologies and business models, and through an evolving process using many relatively lower paid scientists and technicians, make incremental improvements in products. This process is different than in the United States, where many innovations begin in the garages of millions of entrepreneurs’ homes, and considerably different than the typical Chinese process, where the government dominates business, often chooses winners and losers, and invests accordingly.

These economic gambles, if successful, can reward policymakers and workers by creating tremendous numbers of jobs. But if wrong decisions are made, the negative impact, if sustained, can be extremely costly.

This articles appeared in Global Impact, a Great American Insurance Group publication.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.

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