If a country has an opportunity to rise, it will. However, Dr. Andrew Kennedy argued power today depends in part on advanced technology, and developing countries' pursuit of advanced technology faces many formidable challenges, in economic, military, and soft-power terms. Information and Communications Technology, or "ICT," is the technology that Dr. Kennedy discussed, and, in that area,, the present challenges facing China and India are many and varied. The primary challenge is a kind of friction to the diffusion of technology and ideas through trade, education, and open source materials. Although an inability to efficiently exploit such diffusion and use it to one's advantage is a tremendous challenge facing China and India, Dr. Kennedy provided ample evidence that China has made vast improvements in this area while India is lagging behind.
Although marketing plays a large role in an ICT firm's success, the primary factor is research and design..Why is R&D so crucial to an ICT firm's success and what has it done for China, which has traditionally been a manufacturing-driven economy? Dr. Kennedy provided an answer, and that was Stan Shih's Smiling Curve. Stan Shih, one of the key founders of Acer, a multi-billion dollar ICT company, argued that the firm's success was based upon maximizing contributions and competitiveness in the areas that had the largest value-added. Basically, this means that if an ICT company has capital, it can invest prudently in both R&D and marketing, and see bigger returns than if it invests in manufacturing. While China has traditionally been a key player in global manufacturing, its role is changing fast. R&D in China's top companies still only composes a fraction of estimated global expenditures on R&D, but it is increasing more quickly than any other country. China already has many players investing millions of dollars in R&D, including Huawei, ZTE, Lenovo, Tencent, and Giant Interactive. These firms have realized that to make it big in the ITC industry, they will need to increase their R&D spending tremendously.
One of the key examples Dr. Kennedy used to demonstrate the success represented by the Smiling Curve was the Apple iPhone, an oft-used case study of an ICT company that has been tremendously profitable by investing in R&D and marketing an attractive product. Apple is also famous for not manufacturing its own products and has received bad press for its outsourcing, especially to electronics manufacturers like Foxconn Technology Group. It is, however, one of many ICT stories whose success reflects the logic of the Smiling Curve and has, by diffusing technology, contributed to China's rise.
Chinese companies presently file for more patents than any other country, and its patents are increasingly cited in others’ patent applications. Dr. Kennedy acknowledged that this observation does not provide a reliable metric for measuring R&D, but suggested that China's R&D investments are starting to pay off, and the payoff will only get bigger in the coming years.
One question that was raised during the presentation was a recent study about china's family planning policy, also known "the one child policy." Published in Science 11 January 2013 and conducted by Australia National University, it garnered significant attention. It found that the "Little Emperor" generation-- a generation from families in which 4 4 grandparents and 2 parents dote upon one child--is significantly less trusting and more risk averse. As a result, this generation is not likely to be well suited to spurring innovation. The impact on China's ICT industry's future remains to be seen.
Dr. Andrew Kennedy is the Senior Lecturer of the Crawford School of Public Policy at Australia National University and received his Ph.D. in Political Science from Harvard University. This event was sponsored by the Center for the Study of Contemporary China (CSCC) and the Center for the Advanced Study of India (CASI) at the University of Pennsylvania. For more information about upcoming CSCC events, please visit our website.