Introduction
I have been visiting China on official trips every year since 2009. My last trip was in May 2019 when I was invited as one of the panellists for an International Think Tank Forum held in Beijing. Every trip to China never failed to impress me with the speed of its innovation, while preserving its rich culture and heritage. Over the last decade, I have visited big cities like Beijing, Shanghai, Chengdu, Guizhou, Hangzhou, Shenzhen, and Xiamen. I am also lucky to have the opportunity to visit the headquarters of Alibaba, Tencent and JD.com. I will share about three cities I have visited that impressed me the most in terms of innovation.
Chengdu Hi-Tech Zone
Chengdu is the hometown of Panda and is famous for its spicy foods. Chengdu is also famous for its Hi-Tech Industrial Development Zone (CDHT). Established in 1988, the industrial zone has expanded rapidly compared to when I first visited the city in 2012. CDHT now includes Tianfu International Bio-town and Future Science and Technology City. By 2020, it gathered 237,100 market entities, including over 150,000 enterprises, among which there were 56,000 scientific and technological enterprises and nearly 40 listed companies (cdht.gov.cn). It houses top multinational companies such as Intel, Huawei, BOE, Dell, Lenovo, and Texas Instruments, to name a few. CDHT industrial zone focuses on three main areas; Electronic Information Industry, Biomedicine Industry, and New Economy Industry.
China’s Big Data Valley
Guizhou, an area surrounded by mountains, is known as China’s Big Data Valley. It hosted the annual China International Big Data Industry Expo, attracting hundreds of companies worldwide including Fortune 500 companies. The number of enterprises associated with big data soared from less than 1,000 in 2013 to 9,551 in 2018 (China Briefing, February 26th2022). Leading tech giants such as Apple, Foxconn, Intel, Qualcomm, Oracle and SAP have established their presence there.
In 2017, while attending the 10th China-ASEAN Education Cooperation Week (CAECW), I took the opportunity to visit the Innovation and Entrepreneurship Park of University Town. It locates 12 universities, vocational, technical, and educational colleges. What makes it more interesting is, the area also houses several China big data companies and hundreds of start-ups run by students, all focusing on big data. The companies become mentors to the start-ups and provide on-the-job training for the students.
China’s Silicon Valley
Beijing’s Zhongguancun or Z-Park, established in 1988, is known as China’s Silicon Valley and is home to more than 9,000 hi-tech firms. Located in the heart of Zhongguancun is Innoway, a place I visited three times. Innoway is the most intensive area of Science, Technology, and Education in China. It was established to foster entrepreneurship and as a platform for an open exchange with global players in the innovation ecosystem. One start-up owner from South Korea I met said, China is the best test market for new products.
Along the 220-metre long street, there are 45 incubators and about 3,000 start-ups, including more than 200 foreign start-ups. Peking University and Tsinghua University both own several incubators under their names. So far, Innoway has successfully incubated 2,900 start-ups and raised a total of RMB9.1 billion. Nearly half of China’s unicorns are located in the area (en.z-innoway.com). Just a short walk from Innoway is Edu Online Park, a one-stop centre for Massive Open Online Courses (MOOC) and Massive Open Online Experiments (MOOE). Thousands of local start-ups develop MOOC and MOOE modules from kindergarten to higher learning institutions. What impressed me most is the MOOE developed using Virtual Reality, Augmented Reality, and Mixed Reality for virtual science experiments.
Lessons Learned
Rafael Reif, President of the Massachusetts Institute of Technology (MIT) once said, the key to MIT success is collaboration. That is particularly true in the case of China. One lesson I learned from my many trips to China is the close collaborations between its innovation centres, companies, institutes of higher learning, and government agencies (Quadruple Helix). Beijing, for example, has two world-class universities, Peking University and Tsinghua University that work closely with Innoway and own several incubators and start-ups under their names. Hangzhou, home to the headquarter of Alibaba, one of the world’s Internet industry leaders, is also the home of Zhejiang University, a research-intensive and one of the world’s top 100 universities.
Similarly, the Southwestern University of Finance and Economics (SWUFE) located in Chengdu work closely with CDHT since its establishment in 1988. That makes the learning experience more relevant and impactful not only to the students but also to the industry and the community. I was told by my colleague, the Business School Dean, that SWUFE plays an internal mentor role to the local companies, while successful companies later on become external mentors to the newly set up companies.
Talent, Capital and Ecosystem
Innovation requires talent, capital and an ecosystem (Xinjin Zhao). China has the talents and capital, and with the impressive ecosystem it has and is continuously creating, China will be leading the world in innovation in no time. Unlike the United States (US) and European countries which rely on private initiatives, innovation in China is driven by the government. That was historically true for Japan and Korea when their governments initiated industrial development after World War II. Similar to Japan and Korea, China also started with imitation in its early stage of industrial development before transforming itself into an innovation-driven economy.
I remember when I studied in the US in the early 1990s. Korean cars were the least preferred cars by Americans. Barely two decades later, Korean brands like Hyundai and Kia are among the top on the list of popular cars in the US market. Korean brands, like the Japanese, have gained recognition to penetrate the global markets and compete with global brands, in terms of speed of innovation, cost, and innovativeness. To be at the forefront, Samsung, for example, hires thousands of PhD holders for its Research and Development (R&D). Despite some hiccups due to the US export restrictions, China’s Huawei is fast becoming a leader in 5G technology.
The Malaysian government has also invested in the car industry with its national car project, Proton. However, after more than three decades, unlike Hyundai or Kia, Proton is still struggling to gain global recognition and fail to penetrate the global markets. Another example is Multimedia Super Corridor (MSC). Established in 1996, MSC offered a promising future for the country’s digital economy initiative when it attracted many top multinational companies. However, unlike CDHT in China, the development of MSC seems to be stagnant and struggles to produce successful local start-ups that are able to compete globally. To revive the initiative, the Malaysian government has recently rebranded MSC into Malaysia Digital (MD).
Moving Forward
As explained in the earlier section, Malaysia needs to have the right talent, capital and ecosystem. Talking about talent, Malaysia has 20 public universities. There are five research universities, four technical universities, and the rest are either classified as comprehensive or research universities. Malaysia also has hundreds of private universities/colleges, polytechnics and vocational colleges. However, talent must be nurtured in schools where they can sharpen and apply their knowledge and skills at the universities.
Research plays a critical role in the innovation agenda. Research universities are designed to focus on basic research that addresses complex and futuristic issues. Technical universities, on the other hand, are designed to focus on applied research that provides solutions to immediate problems. To be an innovation-driven nation, it is important for Malaysia to focus on both types of research. Gao of China Development Institute said, “Basic research and the application of technology (applied research) complemented each other. Once you have research that is transformed into real-world applications, the process will encourage fundamental research and make it more sustainable” (South China Morning Post, January 28th 2022).
To embark on disruptive and upstream research, universities and research institutes need funds. Recently, the Director of Khazanah Research Institute (KRI) urged the Malaysian government to lead innovation initiatives by sponsoring large-scale research that can support certain industries (Bernama, January 25th 2022). At the same time, government-linked companies should invest more in R&D and employ PhD graduates in the critical areas of Science and Technology. A quick review of the Global Innovation Index (GII) shows that Malaysia is ranked 36th in the world in 2021, a slight drop from the 33rd position in 2020. Malaysia seems to be stuck in the 30+ position for the last decade. On a positive note, the number of patents shows quite a significant increase in 2020 (MyIPO). However, the total IP granted is still dominated by foreigners (84%).
Professor Diego Comin in his book, Malaysia Beyond 2020, argued that Malaysian productivity has declined since the 1990s due to the lack of innovation. He proposed a demand-driven research concept, known as Public-Private Research Network (PPRN) to match the industry needs with research expertise at the universities. Agencies like MTDC, MDEC, MRANTI, MAVCAP and Cradle also play an important role in providing funds and an ecosystem for the researchers and the local start-ups to translate their ideas and research outputs into commercialised products. Like Singapore-Sichuan Hi-Tech Innovation Park in Chengdu, Malaysia needs to establish collaboration with the world’s top innovation centres. NUS has ten research centres around the world such as Silicon Valley, Beijing, Stockholm, Nagoya and Israel to upscale their research products prior to commercialisation.
Conclusion
There are two indirect indicators of innovations: patents which show the number of inventions and venture capital which provides the financial backing to turn those inventions into products. Research universities need to embark on fundamental (basic) research and technical universities must focus on applied research. In addition to publications which is important for the ranking of universities, universities must focus on the number of IPs must be one of the key KPIs. That can be done by doing relevant and impactful research. However, researchers need funds for the research and local start-ups need capital to transform research into commercialised products. Therefore, government investment is critical to fundamentally changing Malaysia’s innovation trajectory. In order to move out of the middle-income trap, we not only need to innovate, but private companies and innovation-driven entrepreneurship culture have to play a more vital role in innovation. The teaching of Science, Maths, and Coding is critical in schools. Universities and colleges need to produce quality graduates in Science, Technology, Engineering, and Mathematics (STEM). Start-up culture must begin at universities, not after graduation. Finally, the Quadruple Helix concept between universities, research institutes, ministries, relevant government agencies, and private sectors is important for Malaysia to progress into an innovation-driven economy.
Note: This article is co-authored with Nurhusna Zulkifli and Dr Adams Adieza. Dr Azizi is a professor of accounting information systems at Universiti Malaysia Kelantan (UMK) with a passion for technology, innovation and entrepreneurship. Nurhusna is a Research Officer at UMK who is interested in exploring research related to technopreneurship education ecosystem as well as the third mission of entrepreneurial universities. Dr Adams is a senior lecturer at UMK and has experience in the start-up’s ecosystem in both Nigeria and US.
Innovation: Lessons From China by Noor Azizi Ismail, Nurhusna Zulkifli and Adams Adieza
