This particular piece is another example of shallow research that goes for journalism in India. While China has certainly made some impressive strides, like in other sectors, by pouring money into R&D, how effective that money has been is open to questions. Typical of China there is huge wastage with cronism even in research grants.
Two IP experts, University of Maryland's Anil Gupta and Hiyan Wang have done some impressive research into innovation and IP creation in China and India. In a recent article in WSJ, a cashed copy of which is this
has some very interesting points.
The "inputs" for innovation are impressive. China's R&D expenditure increased to 1.5% of GDP in 2010 from 1.1% in 2002, and should reach 2.5% by 2020. Its share of the world's total R&D expenditure grew to 12.3% in 2010 from 5.0% in 2002, placing it second only to the U.S., whose share remained steady at 34-35%. According to UNESCO, China now employs more people in science and technology research than any other country.
At first blush, data on "outputs" also look impressive. According to the World Intellectual Property Organization, Chinese inventors filed 203,481 patent applications in 2008. That would make China the third most innovative country after Japan (502,054 filings) and the U.S. (400,769).
The top two quotes has all the flavour to make our Chinese drones drool in the mouth. However, as with all things Chinese once you scratch the surface, something else altogether comes up. Read on...
Yet there's less here than meets the eye. Over 95% of the Chinese applications were filed domestically with the State Intellectual Property Office. The vast majority cover Chinese "innovations" that make only tiny changes on existing designs. In many other cases, a Chinese filer "patents" a foreign invention in China with the goal of suing the foreign inventor for "infringement" in a Chinese legal system that doesn't recognize foreign patents.
A better measure is to look at those innovations that are recognized outside China—at patent filings or grants to China-origin inventions by the world's leading patent offices, the U.S., the EU and Japan. On this score, China is way behind the others.
The most compelling evidence is the count of "triadic" patent filings or grants, where an application is filed with or patent granted by all three offices for the same innovation. According to the OECD, in 2008, the most recent year for which data are available, there were only 473 triadic patent filings from China versus 14,399 from the U.S., 14,525 from Europe, and 13,446 from Japan. Data for patent grants in 2010 by individual offices paint a virtually identical picture.
So much for the sooper dooper investment in R&D which has the Economic Times reporter drooling.
Starkly put, in 2010, China accounted for 20% of the world's population, 9% of the world's GDP, 12% of the world's R&D expenditure, but only 1% of the patent filings with or patents granted by any of the leading patent offices outside China. Further, half of the China-origin patents were granted to subsidiaries of foreign multinationals.
Why is there such a big gap between innovation inputs and outputs? Partly it may simply be a matter of time. Innovation requires not just new efforts but also a rich stock of prior knowledge. As new players on the technology frontier, Chinese organizations will need several years to build the requisite stock of knowledge.
But other factors are also at work. For instance, processes for allocating government funds for R&D projects remain highly politicized and inefficient. Policy makers have a strong penchant for megaprojects backed by individual ministries and give R&D grants based largely on political clout and connections rather than scientific peer review.
As Yigong Shi and Yi Rao, deans of Life Sciences at Tsinghua and Peking Universities respectively, observed in a recent editorial in Science magazine, for grants ranging from tens to hundreds of millions of yuan, "it is an open secret that doing good research is not as important as schmoozing with powerful bureaucrats and their favorite experts.. . . . China's current research culture . . . wastes resources, corrupts the spirit, and stymies innovation."
While the situation in India can certainly be improved, things are not that bleak.
In another report here
the same authors say this:
China's indigenous innovation program, launched in 2006, has alarmed the world's technology giants. A recent report from the U.S. Chamber of Commerce even went so far as to call this program "a blueprint for technology theft on a scale the world has not seen before."
The goal of the indigenous innovation program is to accelerate China's move up the technology ladder. Using a variety of mechanisms (such as making access to China's market dependent on transfers of leading-edge technologies and R&D labs to China), the program supposedly helps Chinese companies assimilate, absorb and re-innovate upon the proprietary technology developed by foreign companies.
Again at first cut very ambitious. But...
Virtually every assessment of the indigenous innovation program has framed it as a win-lose proposition—a win for China and a loss for foreign multinationals. Our analysis, however, suggests that indigenous innovation measures have been counterproductive for China itself. Instead of inducing technology giants to shift leading-edge R&D work to China at a faster pace, its effect has been exactly the opposite.
So much for all the grand top down plans framed by party bosses.
China today hosts about 1,000 foreign-owned R&D labs. Yet, with rare exceptions, these labs focus primarily on local adaptations of innovations developed elsewhere, rather than the development of leading-edge technologies and products for global markets.
Tech company executives are eager to leverage the quality and scale of China's talent pool. However, given the indigenous innovation measures, they do not trust China as a secure location for leading-edge R&D.
Now, here's the comparison with India:
A comparison with India is illustrative. India has no equivalent to indigenous innovation rules. The government also is content to allow companies to set up R&D facilities without any rules about sharing technology with local partners or the like.
Typical SDRE, right? Hang on...
These policy differences appear to have a significant influence on corporate behavior. Consider the top 10 U.S.-based technology giants that received the most patents from the U.S. Patent and Trademark Office between 2006 and 2010: IBM, Microsoft, Intel, Hewlett-Packard, Micron, GE, Cisco, Texas Instruments, Broadcom and Honeywell.
Half of these companies appear not to be doing any significant R&D work in China. Between 2006 and 2010, the U.S. Patent Office did not award a single patent to any China-based units of five out of the 10 companies. In contrast, only one of the 10 did not receive a patent for an innovation developed in India.
India has proven more fertile territory for these companies. For the 10 tech giants taken together, India-based labs received more patents (1,119) than did China-based labs (886) during this period.
A WTF moment... for the Drones and their apologists right?
At a company level, the difference can be even more striking. For the seven out of 10 companies where Indian units received more patents than Chinese labs, the aggregate numbers were 978 vs. 164. Only a strong showing for China from two outliers, Microsoft and Intel, pulled up its aggregate filings—Chinese labs at those two companies secured 722 patents compared to 141 from Indian labs.
So China gets all those shiny new facilities but the grunt work is being done in SDRE offices in Bangalore and elsewhere. Go figure.
The R&D disparity is all the more striking given China's three seemingly major advantages over India. With a GDP more than three times larger, China offers a much bigger market than India. China also spends four times as much as India on R&D. And China produces a much larger number of Ph.D.s.
Just a note. China spends about 12.5 per cent of world spending on R&D, while India spends about 2.5 per cent. Yet India produces half as many patents as China does. Who is more efficient?