Competition and capability-building in China
For immediate release: 7 October 2014
Oxford China Business Forum:
“Transforming China’s State-Owned Enterprises through Mixed-Ownership Reforms”
Date: 14 October 2014, 13.00-18.00hrs
Place: The Peninsula Beijing
At a time when China’s leaders are urgently focused on the need to promote indigenous innovation in Chinese firms, there is little consensus over what policies are the most effective means of cultivating globally competitive firms in China. Why do globally-competitive Chinese firms emerge in some industrial sectors but not others? To answer this question, researchers at the University of Oxford and the University of Toronto have looked back at the first three decades of the reform period in order to understand what has worked in the past.
The study, by Dr Eric Thun, Peter Moores Associate Professor in Chinese Business Studies at Saïd Business School, University of Oxford and Dr Loren Brandt, Professor of Economics at the University of Toronto, use the concept of quality ladders to demonstrate the role that each market segment plays in the development process. Low-end segments allow Chinese firms space to incubate their capabilities, free from competition from higher-cost foreign firms. High-end segments attract foreign firms that will bring high technology and global suppliers. The middle-segments of the market drive foreign firms to localize activities and create incentives for domestic firms to upgrade their capabilities. This “fight for the middle” plays a crucial role because this is the process that drives innovation in China.
‘What we found was that a full array of market segments at all points on the ladder must be present for firms to be able to build capabilities,’ said Eric Thun. ‘Paradoxically, in its eagerness to support development efforts, the Chinese government often reduces the opportunities and capabilities within the system that local firms can leverage for upgrading.’ Demand in segments in which domestic firms have an advantage may be unintentionally restricted; the supply of firms, technology, inputs and/or skills which are required to meet different aspects of demand may be unintentionally excluded. Attempting to “manage” competition, an approach that is often pursued in China, often weakens the dynamics that drive innovation. This explains why firms in construction equipment and telecom equipment have emerged as strong competitors to global firms, while firms in the automotive and motorcycle sectors have largely failed to upgrade their capabilities.
Dr Thun will be moderating a panel discussion entitled ‘Transforming Chinese Firms through Innovation and Entrepreneurship’ at the Oxford China Business Forum in Beijing on 14th October. The session will look at the need for Chinese businesses to nurture innovation in the face of an increasingly competitive global market. The panel will discuss the challenges of promoting entrepreneurship throughout the Chinese economy and consider how Chinese firms could learn lessons from international markets that lead the way in entrepreneurship and innovation such as Silicon Valley in the US.
• Tina Ju, Managing Partner at KPCB
• Gordon Orr, Chairman, McKinsey Asia
• Gary Rieschel, Founding Managing Partner of Qiming Ventures
• Dr. Peng Zhou, Founder and CEO, SinoEV technologies
Dr Thun is available for interview in Beijing from 13-16 October.
To attend the Forum, to speak to Dr Eric Thun or to request a copy of the study, please contact:
Clare Fisher, Head of Public Relations, Saïd Business School
Direct telephone: +44 (0) 1865 288855; Mobile: +44 (0) 7912 771090
Notes to editors
1 About the research
The study tracked the growth of Chinese and foreign firms over the course of two decades utilizing data from industrial yearbooks, and then used data from over 200 firm interviews conducted over the course of six years to analyze how the segmentation of the market shaped firm capability-building. The researchers compared three sectors with divergent outcomes in China: automotive, construction equipment, and motorcycles.
A copy is available on request: firstname.lastname@example.org
2 About Dr Eric Thun
3 About Saïd Business School, University of Oxford
Saïd Business School at the University of Oxford blends the best of new and old. We are a vibrant and innovative business school, but yet deeply embedded in an 800 year old world-class university. We create programmes and ideas that have global impact. We educate people for successful business careers, and as a community seek to tackle world-scale problems. We deliver cutting-edge programmes and ground-breaking research that transform individuals, organisations, business practice, and society. We seek to be a world-class business school community, embedded in a world-class University, tackling world-scale problems.
In the Financial Times European Business School ranking (Dec 2013) Saïd is ranked 12th. It is ranked 14th worldwide in the FT’s combined ranking of Executive Education programmes (May 2014) and 23rd in the world in the FT ranking of MBA programmes (Jan 2014). The MBA is ranked 5th in Businessweek’s full time MBA ranking outside the USA (Nov 2012) and is ranked 5th among the top non-US Business Schools by Forbes magazine (Sep 2013). The Executive MBA is ranked 23rd worldwide in the FT’s ranking of EMBAs (Oct 2013). The Oxford MSc in Financial Economics is ranked 7th in the world in the FT ranking of Masters in Finance programmes (Jun 2014). In the UK university league tables it is ranked first of all UK universities for undergraduate business and management in The Guardian (Jun 2013) and has ranked first in ten of the last eleven years in The Times (Sept 2014). For more information, see http://www.sbs.ox.ac.uk/
4 About Dr Loren Brandt