Triple Helix in China : Strategic Challenges 9781846637872, 9781846637865

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11/02/2008

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ISSN 1746-8779

Volume 3 Number 1 2008

Journal of

Technology Management in China Triple helix in China: strategic challenges Guest Editors: Lucy Lu and Henry Etzkowitz

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Journal of Technology Management in China

ISSN 1746-8779 Volume 3 Number 1 2008

Triple helix in China: strategic challenges Guest Editors Lucy Lu and Henry Etzkowitz

Access this journal online _________________________

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Editorial advisory board __________________________

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GUEST EDITORIAL Strategic challenges for creating knowledge-based innovation in China: transforming triple helix university-government-industry relations Lucy Lu and Henry Etzkowitz ____________________________________

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How technology-based university research drives innovation in Europe and China: leveraging the power of proximity Sigvald Harryson, Sandra Kliknaite and Max von Zedtwitz_____________

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Mobilizing technology transfer from university to industry: the experience of Hong Kong universities Naubahar Sharif and Erik Baark _________________________________

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A stage model of education and innovation type in China: the paradox of the dragon William H.A. Johnson and Joseph W. Weiss _________________________

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CONTENTS

CONTENTS continued

Forms of knowledge and operation pattern of virtual GUI platform: an analysis of China Zhejiang Online Technology Market Jin Chen, Aifang Guo and Yan Mo ________________________________

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Multimedia University’s experience in fostering and supporting undergraduate student technopreneurship programs in a triple helix model Teh Pei-Lee and Yong Chen-Chen _________________________________

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Emergence of the entrepreneurial university in evolution of the triple helix: the case of Northeastern University in China Chunyan Zhou_________________________________________________

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BOOK REVIEW China’s science and technology capacity building: global perspective and challenging issues __________

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EDITORIAL ADVISORY BOARD

Dr Haithan Al Qahtani Bahrain Economic Development Board, Bahrain

Dr Tang Hung Kei Nanyang Technological University, Singapore

Professor Hojjat Adeli Ohio State University, USA Dr Jeffrey Barlow Pacific University, USA

Professor Tarek M. Khalil President of International Association for Management of Technology, University of Miami, USA

Professor David Bennett Aston University, UK

Professor David Lamond David Lamond & Associates, Australia

Dr Shawn M. Carraher Cameron University, USA

Professor Lin Wang Overseas Chinese Affairs Office of Shandong Provincial People’s Government, People’s Republic of China

Professor David R. Charles University of Newcastle upon Tyne, UK Professor Zichen Chen Chinese Management Science Society, People’s Republic of China Dr Maxine A. Crener International University of Monaco, Monaco

Professor Shi Longguang Zhuhai Institute of International Business and Economics, People’s Republic of China

Professor Bob Cryan Northumbria University, UK

Professor Song Maoping Zhengzhou University, People’s Republic of China

Professor Tony Dickson Raffles University, Singapore

Professor Augusto Medina SPI at University of Porto, Portugal

Professor Philip A. Dover University of Buckingham, UK

Professor Arnoud de Meyer INSEAD, France

Professor Charles Egbu Glasgow Caledonian University, UK

Professor Fujio Niwa National Graduate Institute for Policy Studies, Japan

Professor Kel Fidler Northumbria University, UK Professor Roger Flanagan The University of Reading, UK Professor Li Gong VVC Management, People’s Republic of China Dr David J. Greenwood Northumbria University, UK Professor Wu Guisheng Tsinghua University, Beijing, PRC Dr Guangsheng Guo Beijing University of Chemical Technology, People’s Republic of China Professor Georges Haour International Institute for Management Development (IMD), Switzerland

Journal of Technology Management in China Vol. 3 No. 1, 2008 p. 4 # Emerald Group Publishing Limited 1746-8779

Professor Peng Long Beijing Foreign Study University, People’s Republic of China

Professor Wang Huijiong Development Research Centre of the State Council, PRC Professor Huang Jin Wuhan University, People’s Republic of China Professor Terence Kealey University of Buckingham, UK

Professor David Preece Teesside University, UK Professor Guido Reger University of Potsdam, Germany Professor Jon Sigurdson Stockholm School of Entrepreneurship, Sweden Professor Denis Simon Levin Graduate Institute, USA Professor George Stonehouse Napier University Business School, UK Professor Pete Suttmeier University of Oregon, USA Professor Li Yanping Wuhan University, China Professor Yuan Yijun Dalian University of Technology, China Professor Maurice Yolles Liverpool John Moores University, UK Professor Max Von Zedtwitz Tsinghua University, China

The current issue and full text archive of this journal is available at www.emeraldinsight.com/1746-8779.htm

GUEST EDITORIAL

Strategic challenges for creating knowledge-based innovation in China

Guest editorial

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Transforming triple helix university-government-industry relations Lucy Lu and Henry Etzkowitz Newcastle University Business School, Newcastle upon Tyne, UK Abstract Purpose – The purpose of this paper is to outline the strategic challenges for creating knowledge-based innovation in China. Design/methodology/approach – The paper outlines the context of innovation in China and describes the triple helix model of knowledge-based innovation. Findings – China’s re-emergence as a major power in the world economy points to the needs of integrating China into the global innovation networks. However, there are a number of challenges facing Chinese firms, academics, government agencies and policy makers. Originality/value – The paper gives notice of launch in 2009 of the Journal of Knowledge-based Innovation in China which will address the innovation challenges facing China in the transition from a planned to a market-driven economy in the twenty-first century. The new journal will provide a platform for the development of new ideas and research on knowledge-based innovation. Keywords Innovation, Knowledge management, China Paper type Viewpoint

The context of innovation in China Developing innovation capacities through knowledge creation now dominates the agenda of policy makers and think tanks. The knowledge economy has shifted the paradigm from industrialized and cost-based competition towards the effective production, distribution and use of knowledge for wealth generation (OECD, 1996). Whilst developed countries such as the USA, Japan and western EU countries are regarded as the “knowledge hub” in terms of R&D development and innovation capacities, China as a leading nation in science (Zhou and Leydesdorff, 2006) and a scientific power (ranked after the USA, UK, Germany and Japan in 2005) has become one of the emerging R&D destinations for leading global firms. According to the OECD, spending on R&D in China has increased by a “stunning” 19 per cent a year in the decade from 1995. By 2005, R&D spending had reached $30bn, ranking China sixth in the world (Financial Times, 2007, 9 October). Though China was seen as a “follower” of science and technology and a “manufacture” of the global firms, from now on the China phenomena will change the knowledge balance of the world (Jakobson, 2007). As announced by the Chinese President Mr Hu Jintao: “it is necessary to strive unremittingly to build an innovation-oriented society.”

Journal of Technology Management in China Vol. 3 No. 1, 2008 pp. 5-11 q Emerald Group Publishing Limited 1746-8779 DOI 10.1108/17468770810851476

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The government’s call for “indigenous innovation” has led to significant development in China’s science, technology innovation policy (such as Spark 863, 211, Torch, and 973 projects) and building collaborative relations between research institutions and industry in China. Despite the scale of central government funding for R&D and various government-initiated programmes to stimulate knowledge generation significant challenges remain. Some of the issues in creating an innovation-oriented society across the complex Chinese economic structure have to do with addressing the imbalance of science and technology infrastructure across different geographic locations and regions (Tu et al., 2005). Other challenges are manifested in the nature of knowledge creation and distribution between key actors within China’s innovation system. China suffers from the legacy of the past innovation model influenced by the former Soviet Union that separated publicly funded research institutions and universities from product development within firms. As a result, collaborative innovations between Chinese firms and research institutions have not been promoted effectively to optimize the diffusion and utilization of new knowledge. Though the importance of institutional reform within public research institutions such as Chinese Academy of Sciences has been raised to the top of the agenda by policy makers, the fast development of science-based research and the international trends of multidisciplinary research in different fields create new challenges. Despite increasing R&D investment from Chinese firms[1] and the rise of China’s exports in high-technology[2], foreign-invested companies account for the vast majority of sales and much of the value of their products often lies in software of integrated circuits sourced from the USA and elsewhere (Financial Times, 2007). The development of science-based high-tech products such as pharmaceuticals is still relatively weak according to the National Statistics Bureau. In addition, the interactions and R&D activities between firms and academia are rare outside of science-parks and university run incubators. There has been a lack of integration of knowledge networks between large state-owned enterprise, foreign-own R&D and Chinese SMEs in terms of high-tech development and innovation collaboration. The overall innovation capacity of Chinese firms and technological level of China’s industries to independently innovate is low[3]. The emerging Chinese paradox is the disparity between high R&D spend and the relatively low level of industrial innovation. Our hypothesis is that much of this gap may be explained by relative lack of internal technology transfer capacity in comparison to highly developed international technology transfer capabilities to attract innovations from abroad. Given the rise in local R&D there is a need to focus some of these capabilities at home. In addition to the public research institution and business sector, the higher education sphere also plays a significant role in building up the knowledge infrastructure in China in terms of educating and training human capital as well as contributing to the development of deeper scientific roots and creating world-class universities. Engaging with industry through university-run enterprise (URE) has also become an important means for developing university-industry collaborations in terms of technology diffusion and commercialization although the role of URE and its impact on technology transfer need to be further clarified and understood (Eun et al., 2006).

The triple helix model of knowledge-based innovation Innovation capacity building has been approached from different perspectives. The national innovation system focuses on the role of national institutions in shaping industry R&D activities, whereas the emerging role of region is emphasized in providing local facilities and knowledge infrastructures to develop high-tech clusters and innovative firms. The nature science-driven model argues that knowledge is stocked within the research institutions and innovation is thus perceived as a linear process from scientific invention to production of good. However, it is argued that the new knowledge production has been increasingly based on collaborations and networks between academics, firms and other innovation actors (Gibbons et al., 1994). Knowledge has been seen as embedded within individuals, generated through innovation networks and shared between actors based on trust relationships (Cooke and Morgan, 1998). Among various knowledge-based innovation models, the triple helix (TH) relations of university-government-industry provides an analytical framework for evaluating and analysing knowledge networks and interactions within innovation process at national and regional, institutional and individual level. In order to optimize the potential for knowledge creation, distribution and production, the TH model argues that interactive innovation networks need to be created between academics, firms and government so that: . opportunities may be opened up for “brain circulation” and knowledge sharing between academics, business practitioners and government managers; . academic research is linked with business practice and informed by real market demands; . entrepreneurial culture is developed and new start ups may be created from TH innovation networks as a result of knowledge sharing between academia, industry and government; and . new policy initiatives may emerge from the networks, giving the government a better understanding of where research is located, thus enabling them to design policies to support new research areas. Developing firms’ innovation capacities and the absorptive capacity for new knowledge is arguably the key for developing a knowledge economy. However, simply focusing on industrial capacity building without taking into account the overall knowledge infrastructures and support facilities, including research institutions and government agencies, may create ecological challenges for the sustainable development of the knowledge economy. It is in this respect that the TH model of knowledge-based innovation emerged as a heuristic framework for studying the complex dynamics in relation to the development of institutional innovation networks and interactions among the innovation actors at various levels. Technological innovation in industry is being transformed as the creation, dissemination, and utilization of knowledge moves from the periphery to the centre of industrial production and governance. Furthermore, the concept of innovation itself is being transformed from that of new product or process development (or the first business application of a new technology) to a new sense of “Innovation in Innovation” – the restructuring and enhancement of the organizational arrangements that foster innovation.

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An innovation system comprises the organizations and institutional arrangements that enhance the utilization of knowledge in economic and social development. As knowledge is increasingly research-based in modern societies, a TH of university-industry-government interactions is becoming the core of the innovation system (Etzkowitz, 2008). The TH is an innovation model where university, industry, and government work together and interact closely while each maintains its independent identity. The TH message is that universities, firms, and governments assume some of the capabilities of the other, even as each institution maintains its primary role and distinct identity. The TH develops the method and theory of university-industry-government relations as the means to create more effective innovation systems. How do we enhance the significance of universities and other knowledge producing institutions with the capacity to recombine old ideas, synthesize and conceive new ones? What ways can be invented to encourage faculty and students to assist the formation of firms from academic research in order to improve regional economic and social development? How can governments, at all levels, encourage citizens to take an active role in promoting innovation? How can firms and industries become more open to make use of innovations created elsewhere as well as to become more innovative themselves? What is the key element to reach these goals? We argue that the knowledge economy itself embodies the evolutionary process in which various institutional functions as argued by the innovation system theorists (NIS, RIS, etc.) interact with the knowledge carriers (university, government, industry) in knowledge creation, distribution and production. As noted by Leydesdorff and Meyer (2006), that the TH provides an opportunity to relate the various perspectives. It allows, for example, for studies of changes in institutional arrangements from a neo-institutionalist perspective. That is in terms of networked relations among institutions and focus on the institutional and organizational changes in the process of innovation. The strategic implications of triple helix in China It is clear that the government’s call for an innovation-oriented society underpins the transformational changes within the TH relations between novelty production (university and public research institutions), wealth generation (industry) and normative control (government). Beyond these traditional roles; each sphere may “take the role of the other” for example, universities generate wealth through technology transfer, UREs and spin-offs as well as pursue these tasks collaboratively. China’s re-emergence as a major power in the world economy points to the needs of integrating China into the global innovation networks. However, the recent OECD review on China’s embarking on knowledge-based innovation also highlights a number of challenges facing Chinese firms, academics, government agencies and policy makers. The key issue is, in a nation where the economic development and science and technology policy are very much dominated by the government, to what extent policies made for promoting high-tech knowledge-based innovation are underpinned by the knowledge and innovation capacities embedded within the institutions at both national and regional level? How can China’s successful “government pulled” TH take the next step and promote an even higher level of innovation in innovation? (Etzkowitz and Zhou, 2007).

In the process of developing collaborative innovation networks within TH relations, how to address the “needs” pursued by various institutional actors remains an ambiguous area that requires further investigation and understanding of the policy processes in China. A key issue is how to enhance the independence of academic and industrial actors, so that they may create new initiatives individually and cooperatively with other actors, as well as respond to government policy direction, thereby increasing society’s sources of creative innovation capabilities. Whilst increasing attention has been paid to building up the innovation capacities via the development of “hardware” and physical infrastructure, the challenge is how to develop “software” and an innovation environment that supports and facilitates new ideas, knowledge flow and entrepreneurial spirit within TH innovation networks. Research on innovation development in China has been primarily focused on the quantitative measurement in R&D investment and the technology output. There has been a lack of study on the institutional and cultural changes that help to develop firms’ capabilities of independent innovation. This has pointed to the need for more qualitative case studies on the change process within the TH innovation networks at institutional, organizational and individual level in order to enhance our understanding on the political, economic and social issues involved in the process of knowledge production in China. In response to these challenges that Chinese enterprises are facing, China Association for Management of Technology (CAMOT, www.camot.org) has recently initiated a research programme – China Firm Competitiveness Report. This work presents the crucial tenets of the strategic framework, which underpins the philosophical notion and research methodology to conceptualize: . creating of core competence; and . establishment of competitiveness index and the competitiveness rankings. These are closely linked with the development strategy, marketing strategy and technology innovation strategy of firms. They have strong implications for Chinese and foreign enterprises and will be an invaluable instrument in benchmarking the current position of firms and in determining how to create competitiveness. This also provides essential information for policy makers to benchmark enterprise and innovation policies. We are pleased to announce that the Journal of Knowledge-based Innovation in China will be officially launched in 2009 to address the innovation challenges facing China in the transition from a planned to a market-driven economy in the twenty-first century. The new journal will provide a platform for the development of new ideas and research on knowledge-based innovation. These areas include: . role of universities and public institutions in both knowledge and technological innovation; . dynamics and TH relations interaction in regions and countries; . role of TH and science, technology and innovation policy; . relations between TH and national, regional and sectoral innovation systems; . strategies and implementations TH model in the knowledge economy; . managing knowledge and learning networks within TH;

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models of entrepreneurial universities and its impact on regional/national innovation; university-industry technology/knowledge transfer and spin-offs; role of government in TH interactions; R&D capacity of industry and its impact on TH for regional innovation; role of higher education in regional innovation capacity building; models of R&D and commercialisations; TH and developing firm competitiveness; Impact of Chinese culture on innovation strategy and management; policy process and TH development; and regional economic development strategy.

We welcome contributions and feedback from academic communities, business practitioners, professionals and government agencies so that new theoretical frameworks can be developed to better inform academic, business and government practices and interactions, and thereby enhance our understanding of the complex reality of innovation in China. Go to www.emeraldinsight.com/jkic.htm for further information. Finally, we wish to take this opportunity to express our sincere thanks to the authors who have contributed to this special issue of JTMC and also the reviewers, who gave invaluable comments on the papers submitted to the special issue, which we are delighted to present to you now. Notes 1. According to OECD (2007) report, the business sector in China has become the dominant R&D actor, now performing over two-thirds of total R&D, up from less than 40 per cent at the beginning of 1990. 2. MOST (2007) reports that the share of China’s export in high-technology in total exports increased from 5 per cent in the early 1990s to over 30 per cent in 2005 (Ministry of Science and Technology). 3. Improving the ability of indigenous innovation is the central link to structural adjustment (People’s Daily, 18 January 2006). References Cooke, P. and Morgan, K. (1998), The Associational Economy, Oxford University Press, London. Etzkowitz, H. (2008), The Triple Helix: University-Industry-Government Innovation, Routledge, London, Chinese Edition, East Press, Beijing, 2006. Etzkowitz, H. and Zhou, C.Y. (2007), “The entrepreneurial university in various triple helix models”, paper presented at Singapore Triple Helix VI Conference Theme Paper, available at: www.triplehelix6.com Eun, J.H. and Lee, K. et al., (2006), “Explaining the ‘University-run enterprises’ in China: a theoretical framework for university-industry relationship in developing countries and its application to China”, Research Policy, Vol. 35 No. 9, pp. 1329-46.

Financial Times (2007), “China: research and development is slow to grow”, Financial Times, Tuesday, October. Gibbons, M. and Limoges, C. et al. (1994), The New Production of Knowledge: The Dynamics of Science and Research in Contemporary Societies, Sage, Thousand Oaks, CA. Jakobson, L. (2007), Innovation with Chinese Characteristics, Palgrave Macmillan Publishing, Basingstoke. Leydesdorff, L. and Meyer, M. (2006), “Triple helix indicators of knowledge-based innovation systems: introduction to the special issue”, Research Policy, Vol. 35, pp. 1441-9. OECD (1996), The Knowledge-based Economy, OECD, Paris. OECD (2007), OECD Reviews of Innovation, China, Synthesis Report, OECD, Paris. Tu, J., Gu, S. and Wu, G. (2005), “A new pattern of technology transfer in rural China: triple helix of academy-agriculture-government relations in Baoji City”, Asian Journal of Technology Innovation, Vol. 13 No. 2, pp. 157-78. Zhou, P. and Leydesdorff, L. (2006), “The emergence of China as a leading nation in science”, Research Policy, Vol. 35 No. 1, pp. 83-104. Further reading Motohashi, K. and Yun, X. (2005), “China’s innovation system reform and growing industry and science linkages”, Discussion Papers 05011, Research Institute of Economy, Trade and Industry (RIETI), Tokyo. About the authors Lucy Lu, Co-Editor of Journal of Knowledge-based Innovation in China. Academic Director – MBA at Newcastle University Business School, UK and Visiting Professor of Henan University, People’s Republic of China. Lucy Lu is the corresponding author and can be contacted at: yang. [email protected] Henry Etzkowitz, Founder of Triple Helix Theory and Director of Triple Helix Research Group at Newcastle University and Strategic Advisor on Newcastle Science City Programme (founded by UK Government).

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The current issue and full text archive of this journal is available at www.emeraldinsight.com/1746-8779.htm

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How technology-based university research drives innovation in Europe and China

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Leveraging the power of proximity Sigvald Harryson and Sandra Kliknaite Baltic Business School, Kalmar, Sweden and Lund University, Lund, Sweden, and

Max von Zedtwitz School of Economics and Management, Tsinghua University, Beijing, People’s Republic of China Abstract Purpose – The purpose of this paper is to assess how technology-based university research drives innovation in Europe and China. Design/methodology/approach – This paper draws on extensive theoretical research and literature reviews, and presents a framework based on theories on networking, knowledge creation and innovation. It then introduces three European cases to illustrate practical applications of the framework, and also links the findings to three Chinese cases to make comparative observations as well as recommendations related to Triple Helix concepts and their implications in the China context. It addresses the issue of how learning from universities can enhance company flexibility and performance in innovation, and outlines three different models of collaboration. Findings – The framework and empirical research suggests that weak ties are useful for inspiration in exploration, but that strong industry-university (I-U) ties are required to support exploitation. This finding applies both to Europe and China in the industries covered. Originality/value – This paper provides a new theoretical rationale for I-U learning alliances as a natural way out from the managerial problem of trying to perform both exploration and exploitation within the same company boundaries. Through the theoretical framework, the academic science domain becomes a logical partner to handle the full phase of exploration and support the process of exploitation. The presented European cases of Bang & Olufsen, Combibloc and Porsche offer new insights into how to perform this act in practice, while the three China-related cases allow us to cross analyse empirical findings and draw initial conclusions with policy implications for China. Keywords Innovation, Research, Universities, Networking, Knowledge creation, China Paper type Research paper

Journal of Technology Management in China Vol. 3 No. 1, 2008 pp. 12-46 q Emerald Group Publishing Limited 1746-8779 DOI 10.1108/17468770810851485

1. Introduction When the knowledge base of an industry is both complex and expanding with widely dispersed sources of expertise, the locus of innovation will be found in networks of learning rather than in individual large firms (Powell et al., 1996). Networked innovation (Tuomi, 2002), openness to innovation (Berthon et al., 1999), or open innovation (Sawhney, 2001, 2002; Chesbrough, 2003) implies that companies have more The authors are grateful to the Swedish Government agency VINNOVA for funding the whole research project.

permeable boundaries. Ideas can be spun-out from one organisation and spun-in to another organisation where they offer better complementarity with the innovation strategy and have greater likelihood to reach exploitation (Teresko, 2004). The greater ability to identify and bring in external ideas and technologies enhances a company’s flexibility to respond to changing customer needs. This well-known context of open innovation, coupled with accelerating technological complexity and shrinking product lives[1], creates an intractable dilemma for companies that rely entirely on internal technological development, which may cause internal “competence traps”[2]. To aim for a radical, new solution means destroying, or at least neglecting, part of the accumulated technological knowledge. This – as well as any kind of unlearning[3] – tends to be more difficult the more specialised the researchers, the more advanced the technology development process and the deeper the organisational architecture and legacy business model[4]. Accordingly, the further the technology development process advances, the more it becomes irreversibly self-driven and closed to the dynamic factors that ought to guide it. In addition, due to the lacking networking abilities the new knowledge generated by internal specialists is not well-dissipated across the organization and, therefore, causing further specialisation in isolation instead of transfer to design and manufacturing for transformation into innovation. The so critical and mainly tacit technological knowledge remains stuck in research as suggested by Figure 1. Our conclusion is that many multinational companies (MNCs) have reached an inner limit in terms of flexibility and innovation ability due to excessive internal technological development. We call this the dilemma of internal technological leadership: . The dilemma of internal technological leadership is that successful pursuit of such tends to focus firms on intracorporate activities. This decreases their sensitivity and responsiveness to external technological and market factors that ought to guide innovation. . Moreover, the rigidity of typical technology problem-solving processes impedes cross-departmental collaboration, learning and knowledge transfer, which are vital enablers for flexible exploration and exploitation of innovation

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Increasingly Specialised Researchers who become 'stuck' in research Decreasing Networking and Innovation Capability: Decreasing Capability to Unlearn Decreasing Ability to Acquire New Knowledge Decreasing Flexibility to Learn and Adopt to Change Decreasing Knowledge Transfer & Transformation between R&D and D&M Evolution toward Technological Leadership and Architectural Stability

Figure 1. The dilemma of internally generated technological leadership

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(Lorange and Nelson, 1987; Leonard-Barton, 1992). The technology development process becomes increasingly self-driven and irreversible (O’Connor et al., 2001, 2002). The tacit knowledge-base might increase at the level of specific individuals, but without systematically transforming into organisational knowledge that can drive speed and flexibility in innovation (Hedlund, 1990; Harryson, 1997).

Clearly, this dilemma provides several rationales for external sourcing of specialised technologies and skills. In this context, it seems that new forms of organisational flexibility and learning alliances are required to adapt to substantial and uncertain changes in the environments. Many firms turn to external sourcing strategies and learning partnerships to acquire new knowledge and reduce uncertainty in R&D. According to leading literature[5], the key factors contributing to this trend include: . the growth in cross-technology and field interdisciplinarity; . the globalisation of technology and proliferation of sources; and . the necessity for rapid commercialisation at reduced risk and cost. While these are perfectly valid arguments, they miss one perhaps equally important point, which is to use learning through external networking not only to acquire new knowledge, but also to improve the ways in which people learn from each other and transfer knowledge within the company. An important finding from our research on a selection of technology innovation leadership companies in Japan[6] and Europe[7] is that external sourcing of technologies and skills does not have to result in a hollowing out of internal R&D capabilities. In contrast, it seems to energise and create a unique flexibility to network tacit knowledge and disruptive technologies into innovation. This unique flexibility does not seem to have been revealed so far in the current literature on the topic – nor how to leverage learning alliances with universities across both extra- and intra-corporate levels to support both exploration and exploitation of innovation. 1.1 Industry-university collaboration to support learning both in exploration and exploitation If innovation is viewed as the ability of organisations to adopt new ideas, processes or products, learning alliances between industry and academia can enhance both flexibility and speed of innovation. Indeed, industry-university (I-U) collaboration is recognised as a critical form of learning alliance, and an essential instrument to gain speed and flexibility in technology innovation, while reducing cost in R&D. As stated by Etzkowitz and Leydesdorff (2000, pp. 117-18): Students are also potential inventors. They represent a dynamic flow-through of “human capital” in academic research groups, as opposed to more static industrial laboratories and research institutes. Although they are sometimes considered a necessary distraction, the turnover of students insures the primacy of the university as a source of innovation.

As a consequence, we see the emergence of new and more flexible “triple-helix” models of knowledge generation with an increased orientation toward the exploitation of publicly funded research (Leydesdorff and Etzkowitz, 1996; Etzkowitz, 2003). However, while the degree of I-U collaboration is increasing, it is still widely recognised that such collaborations are exposed to significant learning barriers – summarised in Table I.

Main barriers

Accounts by authors

Lack of adequate resources on industry and university side Cultural differences between industry and university counterparts Inflexible academic research timetables Long-term orientation of academic research, tending to remain in exploration – vs focus on short- and medium-term exploitation-oriented research by companies Incompatible reward systems with focus on publishing vs protecting results Risk related to obtaining control over university inventions through IP rights I-U collaborations struggling with exploitation of too premature technologies

Schartinger et al. (2001)

Leveraging the power of proximity

Kruecken (2003) Liyanage and Mitchell (1994) Mansfield and Lee (1996), Howells and Nedeva (2003), Gonnard (1999), Liyanage and Mitchell (1994), Beise and Stahl (1999), Meyer-Kramer and Schmoch (1998) and Chiesa and Piccaluga (2000) Santoro and Chakrabarti (1999) and Howells et al. (1998) Graf et al. (2002) and Rappert et al. (1999) Thursby and Thursby (2003)

Many of these barriers relate to a fundamental difference between corporate and academic research: scientific knowledge produced by companies is usually claimed to be short- and medium-term oriented, aiming at exploitation, whereas the strength of academic research is claimed to prevail in exploration, but seldom coming up with results ready for commercialisation. As a consequence, I-U collaborations are often struggling with exploitation of too premature technologies. Addressing these learning barriers, we propose three distinct I-U collaboration models – all aiming at effective learning between academic and corporate research, but with a different balance between exploration and exploitation and a different focus on weak and strong ties across open and closed networks. To start with, we will introduce the different types of networks required for exploration and exploitation, before we move to practice with the three European learning-models. 2. Network theory framework 2.1 The strength of weak ties Granovetter (1973, p. 106) is the pioneer in highlighting and exemplifying the importance of weak ties in linking otherwise unconnected networks. He argues that individuals with few weak ties have difficulties to be up-to-date with information from distant parts of the social system, and that “social systems lacking in weak ties will be fragmented and incoherent”. In the context of innovation he argues that new ideas more often emanate through weak ties from the margins of a specific network rather than through strong ties from its core or its nucleus. Accordingly, the relative strength of weak ties can transform marginal idea creating networks into a new nucleus of innovation. This argument poses new challenges to the science of innovation management: if the idea creation process is centred within and around marginal networks and their relatively unstructured weak ties, it becomes difficult to manage the main source of innovation and hence also difficult to control the innovation process as a whole – at least if attempted to do it all within one and the same company. It may be that innovation requires management of both weak and strong ties cutting across

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Table I. Summary of learning barriers in I-U collaboration

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both peripheral and core networks with a strong focus on developing and managing relationships for transfer and transformation of information into innovation. Hansen (1999) uses a network study to explore how weak inter-unit ties help a new product development team with purposeful knowledge-sharing. His findings are that while weak ties help the team find new knowledge located in other units, the weak ties are not useful in supporting the actual transfer of complex knowledge. The more complex the knowledge, the stronger the ties required to support its transfer. If these findings are correct, it is also reasonable to assume that weak ties will accelerate development speed in early phases of exploration when the required knowledge is not complex. This argument is substantiated by the observation that exploration leading to the internalisation of knowledge is characterized by relatively higher levels of individual autonomy. Conversely, weak ties will not be supportive, or even slow down speed, in situations of high-knowledge complexity where strong ties will support the required learning to drive exploitation of innovation. 2.2 Open and closed networks Along the connectivity dimension of the social network, we can also distinguish between open and closed networks. Having no social capital on which to rely, the open network is mainly about resource exchange of information, while the closed network focuses on social exchange, trust and shared norms (Walker et al., 1997). An example of an open network is one in which firms have direct social contacts with all their partners, but these partners do not have any direct contacts with each other. A high number of such non-connected parties, or structural holes, means that the network consists of few redundant contacts and is information rich, since people on either side of the hole have access to different flows of information (Burt, 1992, 1993). This implies that the structure of an open network is suitable when the purpose of the network is knowledge creation by maximising the number of contacts gathering, processing and screening new sources of information. This kind of more exploration-oriented network then stresses the indirect linkage, has mainly weak relationships and is loosely coupled. The opposite is the tightly coupled closed network, where all partners have direct and strong ties with each other. This network is centred on social capital, which is built through trust and shared norms and behaviour (Coleman, 1988). Embeddedness in dense networks supports effective knowledge transfer and interfirm cooperation (Granovetter, 1985; Walker et al., 1997). We believe that this type of network is required for exploitation, but not suited for exploration. Ahuja (2000) highlights the contradiction between open and closed networks and proposes that the larger the number of structural holes spanned by a firm, the greater its innovation output. There seems to be a trade-off between a large loosely coupled network that maximises information benefits and a smaller tightly coupled network promoting trust building and more reliable information. This contraction is studied in the context of project teams by Soda et al. (2004), who argue that the best performing teams are those with strong ties among the project members based on past joint-experience, but with a multitude of current weak ties to complementary, non-redundant resources. If we summarise the complementary networking theories in a model, it would seem that the network structure required for exploration is the absolute opposite of the one required to support exploitation. We can also conclude from the literature that a project

team should have its nucleus in the north-eastern corner of Figure 2, but also have a multitude of current weak ties into the open networks – as represented by the opposing south-western corner. However, we have not found any advice in the literature on how to secure learning within, or how to transfer the results from one network structure into another. This paper will illustrate and analyse how three companies have established distinct models for collaboration with universities that enable learning and knowledge creation within and across both opposing corners of Figure 2. Three mini cases from China will then allow for a comparative analysis of I-U collaboration patterns. The greatest challenge seems to reside in providing relationship management principles and procedures that both foster invention – by stimulating diversity for new ideas to spark – and furthers this invention into value-creating innovation for business implementation. As suggested by Figure 2, the latter requires network structures and processes too rigid and orchestrated to enable the former, but the former requires the latter to turn into reality. Are there any ways of overcoming this fundamental dilemma? Reflections in the 1990s on the highly relationship-driven approaches of Sony, Canon and Toyota led to conclusions like (Harryson, 1997, p. 37):

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. . .ultimately, the knowledge-creating R&D process is no longer limited to individual know-how, but draws instead on know-who – and unlimited global sources of invention that continually nurture internal learning and improve R&D performance.

The “who” in know-who-based companies knows who has the know-how, has the active empathy to rapidly establish the trustful relationship required to acquire that know-how, and has the multiple competencies required to transform and apply it in a new context so that innovation can occur. Stalk (1998, p. xiii) endorses the concept through his argument that “moving from know-how to know-who is not just a powerful tool to increase innovation capacity, it is the sine qua non to manage the continuously increasing complexity of most industries”. In response to our main-hypothesis, the research outlined in this paper suggests that the best approach for a large company to overcome the dilemma of internal

Closed Exploitation Conflicting Network Structures Required for Exploration vs. Exploitation

Type of Network

Exploration

Figure 2. Conflicting network structures required for exploration versus exploitation

Open Weak

Strength of Ties

Strong

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technological leadership is to find new models to combine diversity in exploration and integrative capabilities for exploitation. We believe this is possible for a company that is able to: focus on global scale and process disciplines where it can build competitive advantage; rely on an external network with universities and academic entrepreneurs for inventive technology; and develop the socially competent individuals skilled at networking who use their superior relationship-ability to link the external and internal networks for integration of (mainly external) specialised (often tacit) complementary knowledge and skills to better profit from innovation (Teece, 1986). The main challenge emerging in this context is not to build a multitude of relationships as such, but how build relationships that secure effective transfer of the specialised complementary knowledge and skills and how to achieve joint double-loop learning to transform the results into innovation (Powell et al., 1996). Our main-hypothesis is that flexible exploration and exploitation of innovation are based on a clear distinction between and yet a seamless interconnection of the south-western and north-eastern corners of Figure 2. This flexible interchange will allow for optimal use of the most appropriate network structure to support learning within and across exploration and exploitation. Critical in this context is to secure good transfer and transformation of knowledge in the interchange between the two opposing network structures. After introducing our methodology, our following sections will review how companies can obtain flexibility in innovation by performing both exploration and exploitation in different types of learning relationships with universities and their academic brainpower. Three cases will be introduced in this context – all building learning alliances with leading-edge academic institutions, but through fundamentally different models of collaboration in terms of locus of the interaction and focus on exploration vs exploitation. 3. Methodology Previous research has identified several distinct university collaboration models applied by leading companies in Europe. The perhaps most common ones seem to be: . The spin-off model. Creating a separate spin-off company entirely dedicated to university collaboration in one core technology area – as illustrated by B&O when they spun off their audio power conversion technology into B&O ICEpower (Harryson et al., 2006, 2007, 2008). . The outsourced model. Outsourcing the whole management of university collaboration to a specialised organisation located in a strong university environment to access specialised academic expertise when required by the customer organisation – as practiced by SIG Combibloc, which is an innovative packaging company (Harryson and Kliknaite, 2005). . The insourced model. Insourcing all university collaboration by turning the whole internal R&D and engineering division into a university-collaboration centre focused on exploitation – as practiced, among others, by a European sports car manufacturer: Porsche (Harryson and Lorange, 2005, 2006). This study aims to identify differences between Western companies collaborating with European universities and Western companies based in China collaborating with Chinese universities. Our study does not include how Chinese companies collaborate

with universities. Our paper summarises our last three years of research on I-U collaboration in Europe and introduces new findings from three recent case studies made on how foreign R&D centres in China collaborate with local Chinese universities. We have used a qualitative in-depth case study method since a large extent of information was to be collected from a limited number of research units. The goal was to gain a deeper understanding and knowledge of “how” a selected few companies in Europe [8] – that can be seen as highly flexible innovation leaders in their respective businesses – manage their external I-U collaborations to enhance impact and speed of cost efficient innovation. We think that the three presented European collaboration models best represent state-of-the-art in Europe. Our sample selection both in Europe and in China (ABB, Hewlett Packard (HP), Nestle´) were R&D intensive companies with R&D-focused university collaborations. We conducted framework-based interviews to compare case-studies from Europe developed by some of the authors with case studies in China also fully developed by the authors. The primary instruments in the data collection have been interviews with audio recording and transcribing, including several types of documentation. There has been a continuous interchange between empirical data and theory, as empirical findings initiated the search for further theories. The theoretical model draws on earlier work by Harryson (1998, 2002, 2004) and Harryson et al. (2006). To enhance the internal validity of our cases, we have always had the cases reviewed by the companies in several iterations, and also organised four seminars in which we have presented the empirical research to all the European benchmarking companies for a group-wide dialogue on best practices regarding steering and knowledge transfer in I-U collaborations. Out of the total 126 interviews that were conducted between 2002 and early 2007, 46 were made with B&O, Combibloc and Porsche. The data for the Chinese cases was collected in July-August 2006 through 16 in-person interviews. Three complementing phone interviews were made in October 2007 to respond more accurately to reviewers’ request to explore more in detail how Western R&D centres in China collaborate with local universities. We would like to thank the reviewer for constructive advice, which significantly improved the paper. 4. The cases of Bang & Olufsen, Combibloc and Porsche 4.1 An old problem created a new business – B&O ICEpower Bang & Olufsen (B&O) ICEpower was created as a spin-off from B&O based on the conviction that creative exploration for breakthrough innovation is be better run outside of the main-company – in particular when a strong network of academic research can be leveraged. From the power that goes into an amplifier, more than 99.9 per cent comes out as heat and less than 0.1 per cent is transformed into sound. Initially, B&O had problems with overheating loudspeakers due to this poor audio power conversion efficiency. In order to solve this problem they contacted Copenhagen University of Technology. A research group was formed around the topic, and one PhD student, Karsten Nielsen, found a unique solution to the B&O problem and managed to invent a new power conversion module with ten times higher efficiency and ten times smaller size and yet with better sound quality at only one third of the price of the original amplifier. He named his creation ICEpower – for intelligent, compact and efficient power.

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B&O was very satisfied with the new invention and, in 1998, Dr Nielsen was hired into a small audio power conversion team of B&O to which he also brought four of his master students. After only a short time within B&O, Dr Nielsen saw a greater potential for his technology than limiting it to the market of a low-volume producer in Denmark. Both the CTO and the CEO of B&O saw the benefit of the technology and were convinced that Dr Nielsen could add more value to B&O through a spin-off. Getting additional funds from B&O at the end of 2001, Dr Nielsen moved his team from the B&O HQ in Struer to Copenhagen and rapidly grew to 20 employees. The main-reason to move to Copenhagen was to leverage master students from the largest technical university to enhance the innovation capability of the company. Today, early 2006, B&O ICEpower has completed more than 180 student projects with a structure of 35 internal employees having approximately the same amount of students per year. As opposed to working exclusively for the mother company, some 50 additional customers have been served after four years of operation. Accordingly, B&O now represents 20 per cent of total revenues – while remaining the majority shareholder. The spin-off keeps growing its value while strengthening the breakthrough-image of B&O as a whole. With some exaggeration perhaps, the stock evaluation of B&O doubled in two days when the analysts found out about the ICEpower technology and spin-off plans. B&O ICEpower runs an education program at two universities serving the dual purpose of setting a new standard at the source of knowledge-creation, while also allowing for careful observation and screening of the students before the best ones are invited to join for free to make a joint company-university master thesis. Increasingly advanced courses are offered throughout the five-year master programs, ending with the definition of specific master-thesis topics for the top-students. For example, one thesis topic was to apply the ICE technology to mobile phones. The student first supported the exploration and validation of a breakthrough ICEpower concept defined by the CTO and was then hired to support the exploitation of the same concept, which was transformed into a unique amplifier that will give more powerful sound to the high-end mobile phones of Samsung. 4.2 Combibloc – finding an outsourced solution to network extension Combibloc makes extensive use of university research. Over the past ten years, Combibloc engaged in 39 university projects out of a total of 60 external projects. The total external cost of the university-related projects was less than e2 million, but the results can be directly related to revenues of e700 million through products or services in which the university collaboration results played a significant role. While university collaboration had been used regularly and delivered satisfactory results, The Head of Future Technologies, still felt that his research unit did not have enough time or external reach to leverage the full potential of academic research. He had already collaborated with a professor from the Technical University of Q (called TUQ in this case), and started to think about how to formalise a more permanent collaboration model with him and his network. The professor was lecturing at TUQ in the Research Institute of Packaging Material and Process Technologies. Combibloc was one of six clients of this University Research Institute. Based on the intensifying cooperation with Combibloc and the need for someone to manage the different collaboration projects, the Head of Future

Technologies agreed that this professor would found a private research company working exclusively for Combibloc and getting funding exclusively from Combibloc as well, but without any formal ownership of the company. The company (called RC in this case) has an average of three full time employees. Prior to recruitment into the RC, these packaging experts have all been widely exposed to Combibloc through internships, diploma thesis work, or sponsored PhD work. In addition to the small pool of internal employees, the RC will regularly utilise highly qualified experts from the TUQ, or from other universities, who are recruited on a temporary basis (usually professors or researchers). Through his guest professorship at TUQ and through his formal professorship at another university in a neighbouring country, the professor has an extensive network from which he can select good students for master and PhD theses. An average of ten students are doing their diploma theses for Combibloc at any given time – mostly through RC coordination with the owning professor as academic thesis director. This outsourced solution gave Combibloc permanent access to a skilled team with deep packaging knowledge and a good understanding of the specific business needs of Combibloc. The cost level of the services doubled compared to similar services previously provided by the university TUQ. The doubling of the cost-level is compensated by the more extensive and deep reach into academic knowledge networks and the exclusivity of the results. Moreover, the success-rate of the collaboration projects increased to almost 100 per cent, while the time required by Combibloc employees to establish and steer the projects almost fell to one fourth of previous time requirements. For example, the RC was asked to support the material selection and design of an anvil for ultrasonic sealing. By applying the science of self-frequency it was possible to use thinner dimensions resisting greater tensions than any previous versions. The results could be implemented in the whole installed base – with significant improvement of line-efficiency as a result. 4.3 The insourced solution of Porsche The actual R&D budget of Porsche is kept confidential, but an average of e25 mio per year is spent on university research collaborations, including internship of master students and full sponsorship of specialised material research tasks by universities. In the experience of Porsche, large-scale non-exclusive cooperative research rarely generates any implementable results, and more often than not, cause more work than they save time in R&D. The preferred model for university collaboration is fundamentally different – turning the whole engineering company into an exclusive university-collaboration centre to strengthen and enrich their own R&D activities. In this sense, Porsche applies an insourced model by which the external researchers and students are brought into the company premises with an immediate focus on exploitation of leading-edge “freshly explored” knowledge. As the cost of one full-time employee is equivalent to ten temporarily recruited master students, the insourced model offers a significant cost-advantage. At any given time, there is an average of 250-300 master students working in the engineering centre of Porsche – in addition to the 2,000 internal engineers. No student will be accepted if (s)he is not available for at least four months – so as to secure a certain continuity and start to add value to the company. The students are often asked

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to leverage their “home-contacts” at their respective universities to acquire further knowledge to solve their research tasks. Less than 10 per cent of the students are offered a position on completion of their projects, but the contact is maintained with a large portion of the students through an alumni-network. Peer car manufacturers have developed a strong internal infrastructure and employed researchers and engineers who cover the whole range of the R&D process. Porsche also has large troops of skilled engineers in preliminary and serial development, but employs only some ten specialists in the research area – as opposed to several competitors with approximately 200 researchers in this area. On the other hand, this small group of ten researchers is given full freedom to cooperate with external providers of expertise whenever they require support. For example, in the exploration of ceramic materials for high-performance break systems, the few material researchers of Porsche were not focused on internal exploratory research, but on global networking and technology intelligence to explore and bring together the most relevant external sources of know-how in this area. Two domestic academic research institutes were selected to explore and consolidate decades of research in the related areas and develop a specific compound based on ceramics and very special carbon fibre. Highly specialised component manufacturers were also identified. When the relevant partners had been selected, they were all asked to join the Porsche premises throughout the duration of the exploitation phase to develop and produce a complete system, which is now applied to high-end models, and is gradually being licensed to several other car manufacturers as well – such as Audi and Jaguar. 5. Analysing how B&O, Combibloc and Porsche address the dilemma of internally generated technology leadership All three models seem to allow for a good balance between exploration for technology depth on one hand, and exploitation for customer-driven speed of delivery through concrete market applications with global reach on the other hand. The organisational dilemma of innovation seems to be properly addressed through the organisational set-ups with project networks interlinking academic exploration and industrial exploitation through key-people with extensive know-who (Harryson, 2002) into both spheres. The models support the relationship-dimension of our theoretical framework suggesting that a dominance of weak ties is required for exploration in creativity networks, and a dominance of strong ties is required for exploitation in process networks. All companies continually spin academic webs of weak ties for initial exploration of new inventions. For promising inventions, they selectively transform certain weak ties into stronger ones to individual, organisational and inter-organisational strategic partners who become deeply involved in the exploitation of radical innovation. In this sense, the balancing act from exploration to exploitation can also be seen as an act of conversion from relatively open to more closed networks. However, the focus on and locus of exploration and exploitation differ significantly between the models. B&O decided to spin-off exploration to B&O ICEpower, which is acting as a project network with significant access to and impact on knowledge creation and exploration already at the original source of academic research. Moreover, through interaction with one and the same engineering class spanning the full cycle of a five year master program, B&O ICEpower also can select the best candidates for master and PhD thesis projects.

Accordingly, the main R&D strategy behind the spin-off model is not only to secure further exploration of a breakthrough technology, but also to identify and internalise the best brainpower to support exploitation of the revolutionary ICE standard. The CTO and other key-people of ICEpower initially have an open network of mainly weak ties to the students through their training program. Gradually, the strength of the ties increases through the interaction in courses and through the business-related tasks that they get to solve. Strong ties are developed with those students who are selected to do their thesis in collaboration and co-location with B&O ICEpower so as to interlink their knowledge-creating activities with the process network for exploitation. The project network is gradually closing to interlink creativity and process networks. Combibloc is mainly outsourcing exploration and validation to its primary contact, RC, which acts as project network to maintain both strong and weak ties to a multitude of academic networks. This allows Combibloc to devote full internal time and attention to exploitation. The outsourced I-U collaboration model is mainly supporting speed of innovation by outsourcing clearly defined R&D modules to RC, the results of which are effectively internalised and rapidly integrated into complex packaging systems. Porsche keeps the entire chain of innovation internally, but is building strong ties to temporarily internalised academic resources supporting validation and exploitation of emerging technologies. By selecting and integrating more than 500 master students per year into internal project networks to expand and enrich the brainpower of the 2,000 internal engineers, the insourced model of Porsche offers a significant cost advantage. Following the social structure argument of Burt (1993), the relocation of the ICEpower activities from Struer to Copenhagen to leverage a network of collaborative university ties provided a competitive advantage in getting higher return on R&D investment. In fact, ICEpower has managed to triple its return on engineering man-years in three years through cost efficient collaboration with academic partners and by identifying new areas of exploitation, such as mobile phones. Through its spin-off model with a central position into academic networks for exploration, and customer networks for exploitation, B&O ICEpower seems to have optimised network efficiency on both ends, while the mother company of B&O ICEpower now enjoys higher network effectiveness. Combibloc seems to have successfully delegated the maintenance of networks crucial for exploration to a trusted primary contact (RC) – thereby enhancing networking effectiveness. The B&O and Combibloc models are also conform with Uzzi (1996) who argues that a firm’s performance peaks when it is linked by embedded ties to an integrated network composed of both strong and weak ties. In this sense, both B&O ICEpower and the RC of Combibloc function as fully linked R&D subsidiaries (Helble and Chong, 2004) – having strong links both to external networks and to the respective “mother” companies. By only recruiting researchers who have already worked with Combibloc for their master of doctoral projects RC follows the suggested model of Soda et al. (2004) in getting project teams with high-past closure (strong links within the team based on prior collaboration) and high-current structural holes (weak ties to nonredundant resources).

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This approach is also applied by B&O and Porsche where most employees entered the firm through internships and master-thesis projects. Much in line with Gulati et al. (2000) all three models are creating inimitable and nonsubstitutable value through their vast networks of low cost high-performing master students. For example, Porsche’s alliance formation capability supported the creation of a unique collaborative network that explored a new composite material that was subsequently commercialised through internalisation (insourcing) of all network members for full exploitation of the new technology. Porsche also enjoys the benefits proposed by Ahuja (2000) by tapping into the developed competences of other firms through systematic technology intelligence activities run by the vast alumni network of former Porsche master students – possibly working for main competitors. 5.1 Unique dimensions of the three models A unique dimension of B&O ICEpower is that this spin off was based on a core-technology, and still centres around this core technology. By contrast, Porsche did not create any separate company at all, and the RC was not a technology-based spin-off, but a separate company established through encouragement, but no financial involvement by Combibloc to formalise the collaboration. RC only has Combibloc as a customer, whereas B&O ICEpower was created also to find new customers for the core technology – beyond the captive base of B&O. The insourced solution of Porsche is, naturally, serving only Porsche. As Porsche needs a broad spectrum of technologies, the company does not steer knowledge creation at its original university source like B&O ICEpower does through the advanced university education program. Porsche does not have to set a new standard like B&O ICEpower needs to do in order to secure global market penetration, but both companies are making significant revenues through technology licensing and advanced engineering services – often acquired or strengthened by academic brainpower. Both companies also want to have the academic brainpower in-house for full control of various dimensions, whereas Combibloc has found a solution to out-source this type of collaboration – certainly at a higher cost, but requiring less management attention. 6. The case of China 6.1 The emergence of new competence networks in consumer electronics Historically, China has been a hub for technology implementation in local manufacturing joint ventures for foreign companies. However, due to the new legislation in 2000 by the Chinese Ministry of External Trade and Economic Cooperation that provides preferential treatments on foreign funded R&D, China has managed to build an impressive basis for R&D and has become the third most R&D intensive country in the world. Consequently, China has the second biggest number of researchers in the world and therefore it is expected that foreign-based R&D will become even more significant in upcoming years. As it is a relatively new phenomenon for Western companies to explore China as a location for their R&D activities (only since 1990s), there is very little systematic research done on foreign R&D in China. In addition, few of the existing R&D laboratories in China have so far exploited their full potential, and most are still in process of establishing themselves within Chinese

scientific and technical communities as well as within the company-internal R&D network (von Zedtwitz, 2004). 6.2 The role and know-who-based networking patterns of MNCs Long-proven and globally recognized strategies, value chains and business systems of the Japanese MNCs seem to go through fundamental changes with significant systemic implications (Aoki and Dore, 1994; Chen, 1995; Fruin, 1992; Whitley, 1992). A critical question in this change process is how the Japanese MNCs manage transnational innovation across a truly global knowledge network. This knowledge network spans the entire chain of innovation with strategically selected nodes based on knowledge intensity and labour intensity of each step in the chain. The embryo may stem from a cooperation between an R&D centre and leading universities. Traditionally, this would often be a Japan-based R&D centre cooperating with Western-based universities, like in Canon’s development of the FLC displays in cooperation with Chalmers University in Sweden (Harryson, 1998, 2002). The embryonic knowledge transfer went from Western universities to a Japan-based R&D centre and in turn to a design and manufacturing plant, which was also based in Japan. How does this knowledge transfer process look today as the degree of sophistication of the China-based manufacturing plants has increased dramatically and R&D has been further decentralised – possibly in favour of China? Will there be a future in which both R&D and design and manufacturing are made in China? There are three typical entry models for foreign firms to enter China (von Zedtwitz, 2004): (1) wholly owned independent R&D labs; (2) R&D departments or R&D activities conducted under a branch of a Chinese operation or within its joint venture with the Chinese partners; and (3) cooperative R&D with Chinese research universities and R&D institutes. It is particularly interesting to study how the changes in Chinese legislation are now impacting MNC investments and business activities in respect to university cooperation both in Europe and in China. Are there any universities in China that create and offer scientific knowledge that may become the source of future breakthroughs – like Chalmers once contributed to Canon’s breakthrough in FLC displays? If so, who will be the pioneering companies to exploit and commercialize that research? Also in China, several large companies seem to enjoy strong links to university research. For example, Lenovo is closely affiliated with the Chinese Academy of Sciences, the leading government research institution. Their various commercialised technologies are developed in CAS labs. Tongfang was established and operated by Tsinghua University. Likewise, the Founder Group was established and operated by Beijing University, and Great Wall is a spin-off of the Ministry of Electronics Industry. Researchers developed Great Wall’s initial PC inside MEI research institutions (Kraemer and Dedrick, 2002). Is this spin-out model establishing itself as the dominant channel from science to sales among Chinese universities? Traditionally, the Japanese champions of innovation paved the way in global networking by using Japan-based R&D centres to identify and acquire scientific results from Western universities, transferring these back to the local R&D centre and then migrate the relevant parts into a locally based pilot production plant (Harryson, 1997, 1998, 2005).

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Now that China is not just producing low-cost hardware dominated goods, but also highly advanced products like DVDROM and plasma screens (Staples, 2003), it is far from unthinkable that China also will develop academic core strengths in selected technologies. In this perspective, it is important to understand the implications in terms on innovation value-chains. How long will it take before we start to see direct links between locally generated scientific knowledge and rapidly commercialised breakthrough technologies in China? With which companies and through what models of collaboration will these breakthroughs happen? 6.3 Recent trends in the establishment of R&D centres in China by non-Chinese MNCs It is well-known that many Western companies move their R&D to China for immediate proximity to and collaboration with leading Chinese universities. A study conducted 2003 identified 199 R&D centres by foreign MNCs in China (von Zedtwitz, 2004). Out of these, 95 were of US origin, 56 of European origin and 32 of Japanese origin. More recently, the balance has shifted towards European R&D centres in China. Over the past six years, more than half of the 600 established R&D centres were of European origin. For example, Bell Labs established Bell Labs Research China in 2000 to have a close collaboration with leading Chinese universities and research institutes. In total, Bell Labs now have established six joint research laboratories at three universities: Tsinghua-Bell Labs Joint Labs on Optical Networking Systems, Peking University-Bell Labs Joint Lab on Software Technologies, and Fudan University on Information Science and Technology. According to Yan Yixun, Chairman of China Network Communications and former Vice-President of the CAS, “the agreement with the Bell Labs will enhance the level of scientific research, staff training and information exchange of the CAS” (People’s Daily, 25 November 2000). This trend seems to continue. As recently announced, (press-releases from pharmafocusasia.com, 25 May 2006 and astrazeneca.com, 26 May 2006) Astra Zeneca is starting to invest $100 million in research in China over the next three years. As part of this initiative, the pharmaceutical company will set up the Astra Zeneca Innovation Centre China and also expand its clinical research abilities – a field in which Astra Zeneca already has a collaboration with Shanghai Jiao Tong University on the genetics of schizophrenia. The company is exploring ways to increase the local scientific collaborations through the new innovation centre. 6.3.1 Three brief cases of foreign R&D centres in China. 6.3.1.1 ABB. ABB established an R&D Lab in China on 30 March 2005 – strongly based on previously established university relations. The basic idea behind establishing R&D centre in China was to penetrate Chinese market and to educate local experts to support the business expansion of ABB technology within China. A strong relationship to leading local professors also allows ABB to strengthen their local credibility and, thereby, establish new customer relationships. Globally ABB has 100,000 employees, 10 per cent of the employees and also 10 per cent of the revenues are in China. The R&D expenditure amounts to 5 per cent of revenues, which in 2004 amounted to $1 billion. Research efforts are focused on power systems, manufacturing technologies, and robotics. The R&D lab in China is a part of the Global Lab Power but also works on R&D projects in automation areas. The research takes place mainly in Beijing, but also at a branch in Shanghai. Today, ABB already collaborates with close

to a dozen universities in China – more with the intention to build strong relationships and collaborate on work-intensive development tasks than to conduct blue sky research. For instance, ABB made a donation of laboratories in 2000 to Chinese Key State Laboratory on C1 Technology located at Tsinghua University and Tianjin University. Tsinghua University specializes in Thermal Chemistry of GHGs and Tianjin University in Plasma Chemistry of GHGs. The joint ABB/university labs were set up in 2001. ABB is fully supporting them and is involved in formulating the direction of the research. Nevertheless, the daily operations of the labs are set and managed by the Chinese scientists leading the labs in the respective universities. The collaboration already resulted in over than 20 publications. Additionally, in 28 May 2005 ABB announced that $100,000 will be donated to impoverished students in China for college financing. About 400 electrical engineering students will be granted RBM 2,000 per annum for the duration of their studies. In total over 4,000 students have received this grant since the project started in 2002. Furthermore, Chongqing University and ABB joined in a cooperative project in late 2005 on research on the aging of transformers. They also cooperate with North China Electric Power University. When choosing their universities partners ABB chooses highly ranked universities because they find that those universities have the best professors and the best students. Only the top 20 are considered for collaboration, and the universities are approached through the top officials at the selected university – not through the most known professors as in the West. ABB considers that regarding international issues, Western companies are more proactive contributors to the build up of academic research in China. However, since Chinese professors have a strong link to Chinese companies, Chinese companies are better users of academic research and at the same time better contributors to “local” research/issues. ABB has different approaches in collaboration with universities. They have joint (ABB sponsored) labs as in Tsinghua and Tianjin universities. In the cases where the university has the required knowledge in the respective field ABB gives money to gain access the knowledge. This type of cooperation is preferred to having industrial PhDs who need a long lead time to gain the knowledge and understand ABB needs. Nevertheless, ABB has internal employees who pursue part time PhD and some industrial PhDs. In addition, there are master students that pursue their thesis in collaboration with ABB. The experience with interns at master and bachelor levels is very positive so far: We did not experience any disadvantages in having students at our ABB site. At beginning we were concerned that they would cause leakage of strategic information, but they just wanted to learn new knowledge for their own future (University collaboration officer, interview, 141007).

In spite of positive experience, master or bachelor level students spend only short periods of time at ABB due to a high load of work at Chinese universities. ABB had summer jobs announced for the students, but the students are so busy at their universities that they had little or no time to work at companies. In most of the collaboration cases ABB approached universities with issues to be solved. Nevertheless, on rare occasions, professors come to ABB with their own ideas for a joint collaboration. It is mostly done by professors, who are used to Western culture. In some instances ABB would like to collaborate with a professor because of

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his/her relations to the industry and in turn to the potential customer, for the professor as a neutral person help to introduce ABB to the potential customer. However, the track of successful I-U cooperations with industrial impact at ABB in China is close to zero. Owing to the fact that many Western companies now establish their R&D centres in China and Chinese universities know that Western companies would like to cooperate with them, some of Chinese universities take it for granted that Western companies donate equipment and/or money. They consider this contribution as a gift. And as a consequence Chinese universities do not always strive to produce very good research results for Western companies. In this sense, ABB has captured a certain early mover’s advantage. ABB already have nine university projects running at six universities, five of which already show that they will not lead to implementable results. The universities are working towards academic results that do not satisfy ABB needs as a manufacturing company and therefore the results are not useful from a business point-of-view. The issue is that the company partner usually needs to follow up on regular bases with Chinese universities/professors that they really deliver according to the agreement. If nobody is following up they may not deliver at all. The challenge is not to break the trust bond and to maintain those check ups like visits between friends rather than imposing the feeling of control. The most important key success factor for ABB in collaboration with universities is that universities are knowledgeable in the respective field, know the industry and consider business reality and application of their research in the company. Nevertheless, at the beginning it is hard to find out who is doing what at Chinese universities. One of the simple hurdles is that all university web pages are in Chinese. Additionally, when starting a collaboration with a Chinese professor one cannot call him/her and to ask for a meeting. In China you first need somebody to introduce you the professor to establish a relation. As another contrast to the West, in you cannot conclude that you want to collaborate already after the first meeting. You need to have more meetings and more dinners for the Chinese universities to decide that they will collaborate. Another basic challenge while starting collaboration with Chinese universities, is to set up a contract. In Europe you can do this directly with a selected professor. In China you need to go through the university administration (it is mandatory for an international company). In one case it took one and half years for ABB to set up a contract with the Chinese university. During that time the company could not start to work on the actual collaboration. 6.3.1.2 Hewlett Packard. Today HP already collaborates with close to a dozen universities in China – more with the intention to build strong relationships and collaborate on work-intensive development tasks than to conduct blue sky research: Chinese researchers have more application driven approach compared to the Western researchers. They are more industrial researchers and less theoreticians, which is good for our industry. Industrial research is driven by application. For instance, when we have Chinese researchers working on computers grids as a part of that research they roll it out and are running and managing it. In the West our academic collaboration partners would not work with real world applications (University collaboration officer, interview, 141007).

Nevertheless, HP expands basic research and development in China by establishing HP Laboratories China in November 2005 in Beijing – strongly based on previously long-established university relations. It will complement six other HP Lab sites

worldwide in Palo Alto, Calif.; Cambridge, Mass.; Bristol, England; Haifa, Israel; Tokyo, Japan; and Bangalore, India comprising 600 researchers. Researchers at the lab work directly with strategic customers to drive research and help shape industry advances. The purpose of the research labs is to look beyond current and next generation products and pursue future generation research. Currently, the research that is done in HP Laboratories China is not at that high level. The aim of establishing R&D in China was to strengthen the partnership between HP and China’s leading universities and research community. There is a mixture of people working at this research lab coming from China, USA, and Canada. However, all of them are ethnically Chinese. The lab engages in research aligned with HP Labs worldwide. The research scope includes scalable infrastructure for data management and service integration, digital content management and industry solutions. The establishment of the lab also strengthens HP’s collaboration with the China Ministry of Education to grow China’s university research infrastructure, which allows HP to expand collaborations with universities. HP believes that China will become a centre for innovation with a considerable, educated talent pool. HP collaborates mostly with PhD students. Most PhD researchers are coming and joining the local HP Lab: The advantage of having researchers at our lab is that we get a very high level or energy and creativity and engagement. However, we cannot use them in strategic management decisions concerning strategic research questions as they are not yet qualified. The disadvantage of having researchers at HP lab is the cost of the space locating these researchers and creating the infrastructure for them because only the labour cost is low. This is especially important if you have to create space for 100 researchers (University collaboration officer, interview, 141007).

HP also considers that MNCs deliver tremendous value to Chinese universities – however not yet in fundamental scientific research. Non-Chinese companies are the biggest contributors in building-up knowledge in applied engineering research at Chinese universities. In addition, the local companies get the biggest impact on their business from Chinese universities for their small investment. In China a lot of activity is done by the universities to feed their technology into small Chinese companies through their start up model. Chinese companies can get a faster and bigger impact from university because they are smaller in size compared to foreign multinationals. HP’s strategy is to build long-term relationships with universities rather than hiring large numbers of people into their research lab. Therefore, in the future HP will try to find right research groups and establish partnerships with them. Another model of collaboration with universities is when HP is funding the machinery for a university research group. This initial funding is done more to build the relationship with the university and also to establish a research base for future collaborations. When the base is established and the relationship matures, then HP can expect collaboration results. In most HP-university collaboration cases, universities are looking for a solution to a problem defined by HP. In general, there seems to be better acceptance for HP processes at Chinese universities than in Western ones. In China individuals/researchers seem to be more understanding and go along with the process, whereas in the West there is more free spirit among researchers, which makes them less amendable to management activities imposed by HP. HP also makes joint donations together with other companies. For instance, HP and Intel Corporation donated to universities worldwide (in China: The Chinese Academy of Sciences and

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Tsinghua University) HP servers and workstations based on the Intelw Itaniume processor as part of HP and Intel’s new Itanium-based Systems Grant program. The underlying idea is to enhance university research capabilities and to improve Itanium-based system performance and features for the benefit of all customers. In addition, HP participates in research consortiums in China. HP Company formed Gelato Federation in 2002, a worldwide consortium focused on enabling open source Linux-based Intelw Itaniume Processor Family computing solutions for academic, government and industrial research. Through this federation HP is connected to Fudan University, Huazhong University of Science and Technology, Institute of Computing Technology – Chinese Academy of Sciences, Peking University, South China University of Technology, Tsinghua University and Zhejiang University. Recently, the Education and Research Network (CERNET) announced that CERNET, in collaboration with Intel and HP, will join PlanetLab, a global test bed for inventing and testing prototype internet applications and services. Approximately, 25 leading Chinese universities will be joining as the first group of members. The deployment of PlanetLab in China aims to enhance the R&D collaborations between leading Chinese universities with the worldwide research community to help evolve global technology development for the next-generation internet. The output of any collaboration with universities in China largely depends if the company finds the right research groups that possess the required knowledge. Collaboration with Chinese academic institutions might be challenging in building relationships as they are driven mainly by having the right personal connections at the university. Therefore, the most important key success factor in collaboration with Chinese universities is the development of close relationships with professors and universities. It is also important to understand and meet the needs of the university. In order to establish strong, long-term collaborations with Chinese universities the company needs to go along with the system and hierarchy. Chinese universities have a very strong hierarchical order due to the extreme competition to get to high positions. Therefore, the best universities tend to have the best professors and students, which is not always the case in the West. For example, the company needs to start the collaboration with Tshinghua and Peking universities and only then start to collaborate with smaller ones, not the other way around. Another reason for first approaching Tshinghua and Peking universities are that these enjoy the biggest financial support from the Chinese Government. 6.3.1.3 Nestle´. Nestle´ established an R&D unit in China in 2001, but still mainly focuses university collaboration on two universities. Nestle´’s R&D expenditure in China is 1.5 per cent of their turnover. For Nestle´ university collaboration has always played an important role. It is considered to be a reservoir of innovation and people. The main objectives are to develop local relationships and reinforce technical support and local product development to adapt to Chinese market needs. Before the R&D unit was established, Nestle´ already had cooperations with Chinese universities on the medical side dating 1993 (working on basic research on infant nutrition). Currently they mainly collaborate on nutrition and food science. A strong presence in local universities also allows Nestle´ to contribute to the development of nutrition-related legislations. The newly established facility will conduct research on food and nutrition, and develop foodstuff catering to the tastes of the Chinese people.

Chinese companies do not contribute to the basic knowledge build up of academic research in China because they do not pursue basic research. Chinese companies collaborate on short-term projects with universities which are close to development. Nestle´ would not carry out product development with Chinese universities mainly because they do not have enough knowledge about Western food development and because of IPR issues. It could be done only if a university has developed the product and they will own the IPRs. In the joint I-U collaborations, Nestle´ and the university join their brainpower and knowledge to work on the respective issues. In other cases, the university can have some complementary know how, for example, on local ingredients. In those cases, Nestle´ collaborates with researchers to acquire that knowledge. Another form of collaboration is when Chinese academic medical institutions allow Nestle´ to conduct local tests in baby nutrition. Nestle´ is dedicated to enhance the degree of collaboration with Chinese universities. In the current collaborations, Nestle´ mostly helps universities financially to develop knowledge. In China, this part is more a gift than a collaboration. Today, Chinese universities expect companies mainly to provide funding and then that they can do whatever they want with the funds – as if they had been given by the State. Chinese universities want to collaborate with companies on projects that have substantial budgets, and are generally not interested in small projects. Nestle´ also collaborates with Chinese universities to understand their way of thinking and working. Another reason for collaboration is to get a lot of manual work done when needed. The fact that the Chinese government uses universities’ knowledge to form nutrition-related legislation, allows Nestle´ to gain influence in this area, including practical dimensions such as special nutrition programs for the Olympic games. The research done in collaboration Chinese universities is somewhere in between development and fundamental research. Nestle´ has interns at their sites, who stay for six months. The advantage of having master students for a certain time on the site is that Nestle´ can make an in-depth assessment of the students before a possible recruitment. Most of the students that were working on the site end up in the company. However, in some cases the people/students Nestle´ have access to are not the best out of the best. Sometimes mangers discover much better students in the environment of the professor who were not put in relationship with the company. This experience is less likely to happen in the West where most professors are eager and willing to expose their absolute best researchers to the company collaboration partner. The disadvantage of having students at the company’s site is that the students are loosing direct interaction/supervision with their professors. The consequence of this is felt when managers need very specific data from the students, which requires continuous monitoring of their work. At the company, managers cannot provide very intensive supervision, unless the students have a very high degree of personal initiative. However, most interviewees note that there are not a lot of students with a high degree of personal initiative in China. Together, with the related professors, Nestle´ defines the topics of the students’ theses and the related research work to be performed at the company. Nestle´ invites five interns per year into the R&D centre, which currently has a total of 50 employees. Another model of I-U collaboration is when a professor approaches Nestle´ directly with an idea for sponsoring of further research within the professor’s lab. Most frequently,

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Nestle´ researchers go to a university and ask professors to work on Nestle´ issues. Nestle´ pays for the research to the university or directly to the professor. Additionally, Nestle´ funds research through Nestle´ Foundations such as Qingdao University Medical College, Shanxi Medical University and Shanghai Second Medical University. One of the hurdles of I-U collaboration is that there is less structure and routines at universities in China to interact with companies: not enough offices, people or structure to guide you. Also, Chinese universities have very few web sites to promote their global activities. Therefore, it is difficult for companies to asses the quality of the competences at Chinese universities. The key success factors for collaboration are long-term relationships with the selected universities, which, again, requires good personal relationships with the right professors and those who can introduce you. “Otherwise you will only end up being connected/introduced to those professors who have worked in the West and they may not be the best candidates for the required research purposes” (University collaboration officer, interview, 101007). Also at Chinese universities there are only professors and students and nothing in between like associate professors. The “big” professors will talk only with a senior manager. Professors may not want to talk to company scientists as they may not want to discuss and disclose the information to a “mere” scientist from the company. In the West, company scientists have more direct interaction with peer scientists from universities. In fact, most collaborations are initiated this way and then endorsed by senior managers who sign the collaboration agreement, but are less involved in developing the actual collaboration. Nestle´ have increased collaborations with non university organisations like the Chinese Academy of Science, which is a research network. “In these collaborations we sometimes have labs located at their own institutes” (University collaboration officer, interview, 101007). In this sense, the Chinese Academy of Science starts to fill in quite a big research space – partly because their institutes are more open to collaboration with companies than their university counterparts. It is essential for companies to be very knowledgeable in their fields as a lot of the projects that are proposed by university professors may well have been conducted already done by the researchers who are trying to sell it for the second time. Moreover, during the collaboration, there might be some deviations from what was agreed in the beginning. The company may find out about those drifts at the end or even only after the project ends. One of the bigger challenges is also to ensure that the underlying research data are solid. Therefore, Nestle´ managers are asking researchers to provide the raw data in addition to the findings. The project managers are visiting researchers at their labs on a regular basis. The students are also asked to make presentations during the project and in this way the managers can understand if the students have done the job or not. If the managers still doubt the results they ask for a repetition of the experiment. This is a trust issue in China and companies should bear it in mind. It is also not unusual that data are manipulated to show better results in order to “save the face” of the responsible researchers. Another issue is a low level of English language which makes the use of a “middle man” close to mandatory because all reports are done in Chinese. In general, the reporting skills of Chinese universities are not high as this is not a common practice.

In the experience of Nestle´ the collaboration will succeed if you have an established relationship and do not put too much pressure on data. Trust and understanding are key for good collaboration. 7. Analysing European collaboration models and drawing links to the China cases 7.1 Pros and cons of the spin-off model To start with the point-of-view of B&O, spinning off the most critical core technology into B&O ICEpower – acting as project network at arm’s length from the hierarchy of B&O – was a bold move that offered several important benefits: . Giving more freedom to their specialised researchers to track down and explore completely wild ideas that would have been killed prior to further exploration in the main-company. . Proactively driving the education of new engineers towards the B&O ICEpower standard while offering talented students a fundamentally new playground for exploratory research. . Gaining exceptionally cost-efficient access to more skills by establishing a base in the centre of a university network for unique access to students who do their thesis-projects on a full-time basis under daily supervision of the “ICE” staff. . Deploying B&O ICEpower technology to the entire audio market instead of serving only one captive customer and, thereby, drive technology exploitation in completely new areas that would not have been reached out of the mother company. . Capturing additional value by owning the majority of a fast growing spin-off business, while avoiding possible negative reactions by the main-company’s design and engineering groups where employees, otherwise, may feel that their jobs are being replaced by the student projects. In contrast to the long list of benefits, only a few disadvantages of the spin-off model can be outlined from B&O’s point-of-view: . potential loss of control of the evolution of the core technology; . risk that competitors gain access to the core technology; and . geographical distance between the main-company and the spin-off. The countermeasures against the potential disadvantages are to maintain 90 per cent ownership of the spin-off, keeping the head of design from B&O as the CEO of B&O ICEpower and keeping some B&O ICEpower engineers permanently within the premises of the mother company. 7.2 Pros and cons of the outsourced model Delegating, or outsourcing a large portion of the direct university collaboration to a dedicated project network at a leading university was a convenient move by Combibloc to capture several important advantages: . allowing for long-term-exploration of technologies going into new product generations required for future success;

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enhancing the ability to attack customer problems with a vast pool of scientific knowledge to find new solutions – like the anvil for ultrasonic sealing; getting a clear interface to the “fuzzy” world of academic exploratory research – both domestically and internationally; accelerating the speed of exploration: in three years of time the RC reviewed and analyzed the last 20 years of research relevant to Combibloc; getting assistance in moving from exploratory research to explanatory results, with RC offering practical explanations as to why only some theoretical approaches work in practice; always combining exploratory research with practical experiments to assess the potential for exploitation – often through the development of prototypes; and keeping risk capital for exploratory research under control and improving the possibility to keep research results from academic collaboration confidential.

One potential disadvantage can also be identified in the context of the outsourced model. RC is depending on Combibloc funding – even if Combibloc should not have any research to commission to RC. A failure by Combibloc to honour a minimum commitment to RC would force RC to turn towards new customers for continuity of operations. This new customer would almost by default come from the same industry and possibly be a competitor. 7.3 Pros and cons of the insourced model The insourced model applied by Porsche offers an extraordinary cost-advantage with five students representing the same cost as one internal engineer. With more than 500 students per year, Porsche is able to replace the whole “R” in their internal R&D structure. Master students can make very focussed efforts in specialised areas that may even be hard to motivate internal engineers to do. Additional cost-efficient access to R&D-related knowledge is secured by the vast network of alumnus students who still have a certain loyalty towards Porsche although they may be working for competing car manufacturers. To summarise the benefits, it seems that the Porsche model is providing their internal project networks with “mass master student support” that is: . fast and flexible; . easy to keep confidential during collaboration; . providing a cheap labour source for specialised tasks; . allowing to identify, test and recruit the best engineers; and . giving access to a broad variety of university research networks and to a growing (alumni) network of technology intelligence. While the Porsche approach provides an extreme example of “mass-use” of external brainpower, we can also outline a few related potential disadvantages of the insourced model: . strong dependence on external resources for strategic projects; . risk of leakage of strategic information once the students leave; and . time required for managing the process and logistics of selecting, introducing and coaching more than 500 students per year.

The high dependence on external resources is compensated by a strong patenting capability and an aggressive patenting policy. Secondly, close to all exploitation activities are done in-house by insourcing the external brainpower so as to secure high internalisation and learning, while reducing the risk of leakage. The other obvious countermeasure against leakage is to have strict non-disclosure agreements with all students working in strategic areas. The power of the brand also seems to inspire a strong pride in working for Porsche – with a certain loyalty-effect as well. With the entire application process done on the internet, and by using support by master students also in this web-based recruiting and screening process, the whole HR management of screening more than 2,000 academic resources and making close to 600 temporary contracts per year can be done by one single internal full-time employee. In conclusion, the three models are applied by three quite different companies: the spin-off model of B&O ICEpower has only 35 employees, but with strong links to the mother-company B&O. Combibloc has close to 200 development engineers and some ten researchers in future technologies, but decided to outsource a large portion of their university-collaboration to a Research Centre based at one technical university and having strong ties to many other academic centres of excellence within and beyond the country. Porsche has more than 2,000 development engineers, but only ten people in research – strongly backed up by “temporary in-sourcing” of some 500 students per year. If the primary rationale of B&O ICEpower is enhanced speed and cost-efficiency in both exploration and exploitation and Porsche’s model is mainly cost-efficiency in exploration, Combibloc’s model is focused on time-efficiency in exploration for accelerated commercialisation with less focus on cost-saving. In spite of these differences, all three collaboration models serve the common purpose of allowing the respective companies to take a broader and bolder strategy to breakthrough innovation than if they had been limited to their internal resources for exploration. All three models also serve as excellent recruiting tools in the sense that they allow not only for extensive scanning and screening of candidates, but also for a long and intensive period of engagement to support or ruin possible plans for “marriage”. 7.3.1 Drawing links to the cases on foreign R&D centres in China. 7.3.1.1 Leveraging the power of proximity-both in Europe and in China. Just like all three European collaboration models were designed to leverage the power of proximity, the three cases in China also illustrate the need for proximity to collaborate successfully with Chinese universities. We found that one of the preferred models of I-U collaboration in China is the joint-lab/sponsored-lab model where companies sponsor the lab, or a group of researchers at the university, and define the topics to be pursued. This model is preferred because of the shorter lead time compared to having industrial PhDs. Another preferred model of collaboration is the on-campus model. We noticed more examples of this model in China than in Europe. One important difference both in the joint-lab and the on-campus model in China seems to be that – although these models allow for intimate proximity – university researchers are usually not co-located with corporate researchers to the same extent as we can notice in European on-campus collaboration models. Two important reasons in this context seem to be that university professors are not willing to let their best researchers join corporate labs and that the students seem to have less time for company collaboration than in

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Europe where this type of collaboration is even a mandatory component in many countries to obtain a master’s degree in engineering or business. 7.3.1.2 Size and control seem to matter more in China. It is much easier for a company to set up a collaboration project with a university in the West. A company can come up with small, middle or large budget projects and universities in the West will normally be willing to collaborate on different size projects – as opposed to China where the size of the project (funding) seems to matter more. Also most of the collaborations with the universities in the West are win-win. Currently in China, research fundings are more expected as gifts/donation to establish good relations and a future knowledge base – rather than an investment that will translate into specific research results. Collaboration contracts are less clear/transparent with Chinese universities compared to their Western counterparts. In Europe, professors can be approached directly and asked for a meeting. In China you need somebody to introduce you the professor to establish a relation. The lack of direct communication between peers makes formal project mechanisms more necessary in China than in the West. 7.3.1.3 Individual relationships with professors versus formal relationships with university officials. Both in the European and the Chinese cases, the companies see the benefit of collaborating with universities to build relationships with professors. However, in China relationship development trumps time to collaboration. In contrast to Chinese universities, the quality of professors is not always reflected by the quality/ranking of the university they are working in. Accordingly, in Europe companies look more for the individual professors and less for the formal university per se. In China, companies tend to go exclusively for highly ranked universities and then expect the best professors and the best students to be there. 7.3.1.4 Chinese language and understanding as the best tools to get return on investment in university collaboration. As illustrated in the cases, Western companies need to find the right people to introduce them to the universities and a lot of patience to allow for those relations to mature into sufficient trust levels for mutually fruitful collaborations to start. Therefore, Western companies need Chinese employees or Westerners with good understanding of Chinese culture and good Chinese academic networks in their team. In order to forecast and validate the future deliverables from universities, companies should be knowledgeable in their field to find the right research group at the respective universities. In order to build relationships and gain credibility and trust in the Chinese society/market, companies tend to donate scholarships, equipment and sponsor labs at universities – more as a rule in China than in Europe. Through such funding and different donations, foreign companies seem to contribute to the knowledge build-up regarding international matters and more basic research to a larger extent than Chinese companies do. In turn, Chinese companies contribute to the knowledge build-up at academia more concerning local issues and development. However, foreign companies do not manage to extract knowledge from Chinese universities efficiently and effectively compared to their Chinese counterparts. Based on our initial observations, Chinese companies seem to be more successful in this matter due to mutual understanding of language, culture, and history of relationships between Chinese professors and companies. To overcome this issue, Western companies should .

focus more on hiring ethnically Chinese into their R&D departments to support more seamless university-collaboration. 8. Implications 8.1 Implications for managers For Western companies to gain access to Chinese universities, the establishment of local R&D centres in China is a necessary first step to proximity. However, China-based R&D centres need to adapt to different local rules when collaborating with local universities. Western companies need to change their mindset and expectation levels when approaching Chinese universities. In particular, it will be useful to be mentally prepared that: . More formal high-level involvement is required and expected by the official administration of a newly approached university. The contact making phase is top-down in China rather than bottom-up as in the West. . It usually takes longer time to build a trustful relationship. Formal introductions, long meetings and dinners are vital investments to build a trustful relationship. No real research collaboration will begin until a trustful relationship has been established. . Collaboration projects require more monitoring in China, but this monitoring needs to be performed without imposing feelings of control – ideally in organic ways to show up regularly, but without formal prior notice. Showing strong interest in underlying data will reduce the risk of being misled. . In the West the individual professor typically matters more than the reputation of the university. In China, following the official university rankings is more likely to guide you to the best professors and students. When screening for future academic collaboration partners, companies mainly need to consider the top 20 ranked universities in China – ideally coupled with some cross checking through personal networks. . Western companies need to “think big” when approaching Chinese universities with donations. This most likely implies a focus on only a few, but very intimate and generous university relationships. . University collaborations in China do not always offer the same win-win principle as in the West – at least not in the short run. Research funding and donations to Chinese universities may be expected as gifts without causing an obligation to give something in return. . Chinese professors are rarely inclined give away their absolute top students for company collaboration – they may want to keep these to themselves, which reduces the degree of on-site collaboration. . The level of research at Chinese universities is very disperse and industry specific. For instance, as opposed to ABB and Nestle´ HP finds university collaboration in China to be very pragmatic and application driven, with PhD students willing to work on testable applications and flexible to follow HP management directives. . Western companies would benefit from having more master thesis internships done in their Chinese R&D centres – following the models outlined in our three

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European case companies. This may call for new national policies – as outlined in more detail below. 8.2 Implications for policy makers – benefits and consequences of the European models With respect to the vast pools of university students and researchers available in China, the whole nation would be able to accelerate its strive for innovation leadership by building stronger ties between companies and universities. Accordingly, China would benefit significantly from new policies that: . Promote better transparency of academic resources and activities. Chinese universities need to be encouraged to be more transparent with their research activities and leading scientists so as to more proactively support the match-making process between science and business. They also need to allow for more direct university-company relationships to support immediate links between science and industry. . Support more intimate interaction between companies and universities – possibly by making internships a mandatory part of a master’s degree in engineering and business administration as practiced by many universities in Europe in general, and by all universities in Germany. . Encourage the Chinese Academy of Science to further address the important gap in the Chinese playground of academic and scientific research, by acting as a more pragmatic and implementation-oriented partner for open company collaborations. . Offer more proactive support to foreign R&D-intensive companies to establish domestic R&D centres that can enjoy close collaboration with suitable academic partners from day one – as opposed to spending years in formal dinners before any real collaboration can start. . Encourage universities and their educational programs in China to teach students to take own initiative more proactively. This will take time, but is most likely imperative to help Chinese researchers contribute more forcefully to innovation leadership. 8.3 Implications for further research Our paper makes a comparison of how Western R&D intensive companies collaborate with universities in Europe versus how Western R&D intensive companies collaborate with local universities in China. While our initial research efforts developed good access to Western companies with local R&D centres in China, we have not yet been able to explore how Chinese companies work with universities – both in China and in the West. More local presence and stronger collaboration with local Chinese universities will be required to gain the required access. It would also be beneficial to widen the coverage of different industry sectors – both in Europe and in China as we currently cover only three R&D intensive industries. Also, due to the fact that most foreign R&D sites in China have been established only over the past few years and their I-U collaboration is a very new phenomenon, further investigation of I-U management issues of are required so as to better understand the different collaboration models used, and emerging key-success factors for I-U collaboration

in China. Finally, it would be useful to explore the university-perspective on industry collaboration in China. 9. Conclusions Our paper started with extensive theoretical research and literature reviews to present a framework based on theories on networking, knowledge creation and innovation. Our framework was illustrated and validated through three European cases, and we could also link the findings to three Chinese cases to make comparative observations as well as recommendations related to Triple Helix concepts and their implications in the China context. In so doing, we address how different models for I-U proximity accelerate joint creation and application of knowledge for enhanced flexibility and performance in innovation. In particular, our framework and empirical research suggests that weak ties are useful for inspiration in exploration, but that strong I-U ties are required to support exploitation. This finding applies both to Europe and China in the industries covered. We suspect that process-oriented industries are less dependent on proximity, but have no empirical evidence for this hypothesis yet. Our paper provides a new theoretical rationale for I-U learning alliances as a natural way out from the managerial problem of trying to perform both exploration and exploitation within the same company boundaries. Through our theoretical framework, the academic science domain becomes a logical partner to handle the full phase of exploration and support the process of exploitation. While these types of collaboration start to emerge in China, their development can be significantly accelerated through new policies and practices – as outlined in the last sections of our paper. Notes 1. The importance of time is well captured by Nelson and Winter (1982, p. 279), who, in turn, refer to Schumpeter’s thinking, as they contend that “the payoff to an innovator may depend largely on his ability to exploit that innovation over a relatively short period of time”. See also, Stalk et al. (1992) and Stalk and Hout (1990) for more recent findings on time-based competition. 2. Argyris and Scho¨n (1996, p. 19) define competence traps as “situations in which an experience of perceived success leads an organization to persist in a familiar pattern of thought and action beyond the time and conditions within which it yields successful outcomes”. In similar terms, Lorange and Nelson (1987, p. 42) describe how “competitive success itself may trigger organizational decline by encouraging complacency”. 3. See, for example, Hedlund (1994, p. 22) and Hedlund (1995, p. 24), who argues that corporate forgetting is easier in global (networked) firms through their increased prospects for both internal and external benchmarking and conscious experimentation. In his words, “the future firm is a learning one, but also a systematically forgetting, de-learning one” (p. 28). 4. See McGill and Slocum (1993) for a detailed discussion on what it takes for organizations to unlearn. Takeuchi and Nonaka (1986, pp. 144-5) give several examples of companies that unlearn to increase innovation performance. Kline et al. (1991, p. 7) and Kusunoki (1992, p. 75) argue in this direction. Leonard-Barton (1992, pp. 111-25, 1995) argues that innovation requires core capabilities, but that these have a down side, called core rigidities, that paradoxically inhibit innovation. 5. See, for example, Badaracco (1991, pp. 66-9), Bleeke and Ernst (1993), Contractor and Lorange (1988), Hamel et al. (1989), Fruin (1997), Hagedoorn and Schakenraad (1990, 1994),

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Hedlund (1995, 1994), Lamming (1993), Leonard-Barton (1995), Lewis (1990), Lorange (1996), Lorange et al. (1992), MacDonald (1987), Monck et al. (1988), Nimtz et al. (1995), NYFORKommitte´n (1996), Pfeffer and Salancik (1978), Pisano (1991), Radnor (1991), Speir (1989), Turner (1992), Welch and Nayak (1992) and Yoshino and Rangan (1995). 6. About 150 interviews were made in Japan between 1993 and 2002 – primarily with Canon, Sony, Toyota and Toshiba to explore how these companies build relationships to leverage external sources in general, and university research in particular, as the main source of creativity and exploration so as to put the internal focus on exploitation and commercialisation of the externally created invention. This research laid the foundation of the dilemma of internal technological leadership. 7. Between 2002 and early 2006, we made approximately 120 in-depth interviews on I-U alliances – with ten European technology-intensive companies. 8. Between 2002 and early 2006, approximately 120 interviews were conducted on I-U collaboration – with European Technology – intensive innovation-leaders in wireless high-end consumer goods; HiFi equipment, medical equipment, sports cars, packaging and mobile communication.

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Teece, D.J. (1986), “Profiting form technological innovation: implications for integration, collaboration, licensing and public policy”, Research Policy, Vol. 15, pp. 285-305. Teresko, J. (2004), “Technology leader of the year – P&G’s secret: innovating innovation”, IndustryWeek, available at: www.industryweek.com/ReadArticle.aspx?ArticleID ¼ 9508 (accessed 24 April 2007). Thursby, J.G. and Thursby, M.C. (2003), “Industry/university licensing: characteristics, concerns and issues from the perspective of the buyer”, Journal of Technology Transfer, Vol. 28, pp. 207-13. Tuomi, I. (2002), Networks of Innovation: Change and Meaning in the Age of the Internet, Oxford University Press, Oxford. Uzzi, B. (1996), “The sources and consequences of embeddedness for the economic performance of organizations: the network effect”, American Sociological Review, Vol. 61 No. 4, pp. 674-98. von Zedtwitz, M. (2004), “Managing foreign R&D laboratories in China”, R&D Management, Vol. 3 No. 4. Walker, M.A., Litman, D., Kamm, C.A. and Abella, A. (1997), “PARADISE: a general framework for evaluating spoken dialogue agents”, Proceedings of the 35th Annual Meeting of the Association of Computational Linguistics, ACL/EACL 97, pp. 271-80. Welch, J.A. and Nayak, P.R. (1992), “Strategic sourcing: a progressive approach to the make-or-buy decision”, Academy of Management Executive, Vol. 6 No. 1, pp. 23-31. Whitley, R. (1992), Business Systems in East Asia: Firms, Markets and Societies, Sage, London. Yoshino, M.R. and Rangan, U.S. (1995), Strategic Alliances: An Entrepreneurial Approach to Globalization, Harvard Business School Press, Boston, MA.

Further reading Alvesson, M. and Sko¨ldberg, K. (1994), Tolkning och Reflektion, Studentlitteratur, Lund. Alvstam, C.G. (2001), “East Asia: regionalization still waiting to happen?”, in Schultz, M. et al. (Eds), Regionalization in a Globalizing World – A Comparative Perspective on Forms, Actors and Processes, Zed Books, London, pp. 173-97. Alvstam, C.G. (2002), “Economic interdependence across the South China Sea: bilateral trade and investment relations between greater China and Southeast Asia”, in Korhonen, K. (Ed.), Current Reflections on the Pacific Rim, Helsingin Kauppakorkeakoulun Julkaisuja, Helsinki, pp. 25-49, B-38. Bora, B. and Findlay, C. (Eds) (1996), Regional Integration and the Asia-Pacific, Oxford University Press, Oxford. Burns, T. and Stalker, G. (1961), The Management of Innovation, Tavistock, London. Clark, K. and Fujimoto, T. (1991), Product Development Performance: Strategy, Organization and Management in the World Auto Industry, Harvard Business School Press, Cambridge, MA. Dobson, W. and Chia, S.Y. (Eds) (1997), Multinationals and East Asian Integration, Institute of Southeast Asian Studies, Singapore. Dyer, J.H. and Nobeoka, K. (2000), “Creating and managing a high-performance knowledge-sharing network: the Toyota case”, Strategic Management Journal, Vol. 21 No. 3, pp. 345-67. Eisenhardt, K. and Brown, S. (1998), “Time pacing: competing in markets that won’t stand still”, Harvard Business Review, March/April.

Florida, R., Cushing, R. and Gates, G. (2002), “When social capital stifles innovation”, Harvard Business Review, August, p. 20. Ghoshal, S. and Bartlett, C.A. (1990), “The multinational corporation as an interorganizational network”, Academy of Management Review, Vol. 15 No. 4, pp. 603-25. Haley, U.C.H. (Ed.) (2000), Strategic Management in the Asia Pacific. Harnessing Regional and Organizational Change for Competitive Advantage, Butterworth Heinemann, Oxford. Haley, U.C.H. and Richter, F-J. (Eds) (2002), Asian Post-crisis Management, Palgrave, Hampshire. Hatch, W. and Yamamura, K. (1996), Asia in Japan’s Embrace. Building a Regional Production Alliance, Cambridge University Press, Cambridge. He, Z-L. and Wong, P-K. (2004), “Exploration vs exploitation: an empirical test of the ambidexterity hypothesis”, Organization Science, Vol. 15 No. 4, pp. 481-94. Knott, A.M. (2002), “Exploration and exploitation as complements”, in Choo, C.W. and Bontis, N. (Eds), The Strategic Management of Intellectual Capital and Organizational Knowledge, Oxford University Press, New York, NY, pp. 339-58. Laserre, P. and Schutte, H. (1999), Strategies for Asia Pacific: Beyond the Crisis, Macmillan Business, London. Levinthal, D.A. and March, J.G. (1993), “The myopia of learning”, Strategic Management Journal, Vol. 14, pp. 95-112. March, J.G. (1991), “Exploration and exploitation in organizational learning”, Organization Science, Vol. 2 No. 1, pp. 71-87. Martins, E. and Terblanche, F. (2003), “Building organizational culture that stimulates creativity and innovation”, European Journal of Innovation Management, Vol. 6 No. 1, pp. 64-75. Merriam, S.B. (1998), Qualitative Research and Case Study Applications in Education, Jossey-Bass, San Francisco, CA. Murray, F.E. (2001), “Following distinctive paths of knowledge: strategies for organizational knowledge building within science-based firms”, in Nonaka, I. and Teece, D. (Eds), Managing Industrial Knowledge Creation, Transfer and Utilization, Sage, Thousand Oaks, CA, pp. 182-201. Nonaka, I. (1994), “A dynamic theory of organizational knowledge creation”, Organization Science, Vol. 5 No. 1, pp. 14-37. Nonaka, I. and Konno, N. (1998), “The concept of ‘Ba’: building a foundation for knowledge creation”, California Management Review, Vol. 40 No. 3, pp. 40-54. Nonaka, I. and Takeuchi, H. (1995), The Knowledge Creating Company: How Japanese Companies Create the Dynamics of Innovation, Oxford University Press, Oxford. North, D.C. (1990), Institutions, Institutional Change and Economic Performance, Cambridge University Press, Cambridge. Redding, G. (2002), “The use of business systems theory in socio-economics including the question of rationality: towards an explanation of the private sector in China”, paper presented at the LVMH Conference, INSEAD. Rugman, A.M. and D’Cruz, J.R. (2000), Multinationals as Flagship Firms. Regional Business Networks, Oxford University Press, New York, NY. Tushman, M. and O’Reilly, C. (1996), “Ambidextrous organizations: managing evolutionary and revolutionary change”, California Management Review, Vol. 38 No. 4, pp. 8-30. van Wijk, R., van Den Bosch, F.A.J. and Volberda, H.W. (2004), “Knowledge and networks”, in Easterby-Smith, M. and Lyles, M.A. (Eds), The Blackwell Handbook of Organizational Learning, Blackwell Publishing, Oxford, pp. 428-53.

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von Krogh, G., Ichijo, K. and Nonaka, I. (2000), Enabling Knowledge Creation: How to Unlock the Mystery of Tacit Knowledge and Release the Power of Innovation, Oxford University Press, New York, NY. Westney, E. (2001), “Japan”, in Rugman, A.M. and Brewer, T.L. (Eds), The Oxford Handbook of International Business, Oxford University Press, Oxford. Yeung, H.W.C. (2001), “Organising regional production networks in Southeast Asia: implications for production fragmentation, trade and rules of origin”, Journal of Economic Geography, Vol. 1, pp. 299-321. Yin, R.K. (1994), Case Study Research. Design and Methods, 2nd ed., Sage, Thousand Oaks, CA. Corresponding author Sigvald Harryson can be contacted at: [email protected]

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Mobilizing technology transfer from university to industry

Mobilizing technology transfer

The experience of Hong Kong universities Naubahar Sharif and Erik Baark

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Division of Social Science, The Hong Kong University of Science and Technology, Kowloon, Hong Kong Abstract Purpose – The present paper seeks to illuminate the role played by university-based technology transfer offices (TTOs) in driving the transfer of research-based knowledge and technology from institutions of higher education to industry in Hong Kong. Design/methodology/approach – Following a literature review, the authors use empirical data on technology transfer and innovation, and case studies of existing TTOs at City University of Hong Kong (City U) and Hong Kong University of Technology and Science (HKUST), to analyze and illustrate the changing nature of the role that TTOs have played in Hong Kong, from the late 1980s to the present. Findings – It is found that, while TTOs originally served primarily to generate additional revenues for their affiliated universities through the creation and commercialization of intellectual property, that role has gradually evolved to support innovative start-up companies through technology transfer. Research limitations/implications – This study is limited in having included only two case studies. In the future more cases should be examined, not only of other spin-offs and start-ups from City U and HKUST, but also from other Hong Kong universities as well. The study implies that TTOs should continue to learn how to respond to the needs of start-ups through self-evaluation. Universities should better manage TTOs, and the government, through better understanding of the capacity of TTOs to create spin-offs, should develop policy measures that facilitate the process. Originality/value – This study is among the first to examine the role of TTOs using a case-study approach, especially in addressing the relationship between university-industry linkages and the broader innovation system in Hong Kong. Keywords Knowledge transfer, Innovation, Universities, Hong Kong Paper type Research paper

Introduction and purpose The higher education sector in Hong Kong was transformed significantly in the 1990s as its role changed during the former colony’s transition to its current status as a Special Administrative Region of the People’s Republic of China, and universities continue to occupy a transitional role in Hong Kong society today. With the development of a new policy framework within which to promote technology and innovation, Hong Kong has witnessed a range of initiatives that promote university-industry linkages (Sharif and Baark, 2005), bringing technology transfer offices (TTOs) in Hong Kong to the frontlines of change. Hong Kong’s higher education sector accounted for 80 percent of the total R&D expenditure in 2000, which demonstrates the central importance of universities in Hong Kong’s innovation system. Even the 2003 figure of 56 percent is high compared with those of other advanced

Journal of Technology Management in China Vol. 3 No. 1, 2008 pp. 47-65 q Emerald Group Publishing Limited 1746-8779 DOI 10.1108/17468770810851494

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economies, in which the higher education sector performs on average roughly 17 percent of all R&D (OECD, 2006). TTOs in Hong Kong have evolved gradually; their role in the patenting and licensing of university inventions in Hong Kong has been growing since the late 1980s. As Rosenberg and Nelson (1994) have documented, universities have traditionally transferred knowledge and technology to firms mainly through channels like research publications, consulting, and presentations at professional conferences, and they continue to use such channels today[1]. To understand how the role of the TTO’s in Hong Kong has changed in such an environment, we must situate them in Hong Kong’s wider innovation system because changes in Hong Kong’s general innovation environment over the last decade and a half have driven changes in the functions of Hong Kong’s TTOs. In particular, TTOs in Hong Kong’s universities are gradually beginning to consider the impact of organizational practices and altering their functions accordingly in order to reach a wider range of clients. The role played by TTOs can be effectively understood, then, only within the broader framework of academia-industry-and-government relationships. Yet even such a framework needs also to be situated within an understanding of the innovation system in question. In particular, there are specific elements of the innovation system that affect TTOs on which we need to focus more scholarly attention. These include: . the institutional context of university-industry linkages; and . the availability of financial support (not only through the banking system and venture capital funding but also through the promotion of start-ups supported by TTOs on the part of local stock markets). By distinguishing these various “layers” that affect the functioning of TTOs and thereafter mapping their emergence and functioning, we can identify and explain how the role of TTOs has been embedded in a transformative process within Hong Kong’s wider innovation system. In what follows, we first review the applicable literature and then identify the most salient elements of Hong Kong’s innovation system affecting university-industry relationships. Subsequently, we present detailed case studies of two of the more successful and active TTOs among Hong Kong’s universities – at the Hong Kong University of Science and Technology (HKUST), and City University of Hong Kong (City U). In these case studies, we examine the key activities and functional components of the two TTOs in question. Finally, we provide an analysis and discussion of our research findings. In particular, we show how TTOs in Hong Kong have passed through three distinct transitional phases that have mirrored the transitional phases through which the broader innovation system in Hong Kong has itself passed. Literature review and conceptual approach Policymakers increasingly view universities as engines of economic growth, via the commercialization of intellectual property through technology transfer (Siegel and Phan, 2005). Furthermore, many research universities have adopted formal mission statements regarding the role and importance of technology transfer (Markman et al., 2005). The primary commercial mechanisms of university technology transfer are licensing agreements, research joint ventures, and university-based startups.

Although formal management of an intellectual property portfolio is still relatively new to many universities, both academics and policymakers show growing interest in the commercial impact of university intellectual property. This has produced a body of literature primarily derived from research on two forms of university technology transfer: patents/technology licensing (Thursby and Kemp, 2002; Shane, 2002; Carlsson and Fridh, 2002; Chapple et al., 2005) and university spin-offs (Shane and Stuart, 2002; Steffensen et al., 2000; Franklin et al., 2001; Lockett et al., 2003; Lockett and Wright, 2005). These research efforts reflect a substantial increase in the level of involvement by universities in technology commercialization activities, with the major research universities in the USA leading the way. Most notable among a growing number of university-specific studies along these lines[2] are those conducted by Mowery et al. (2004), which presented the most extensive analysis of university-industry technology transfer in the USA in recent years, and by Mowery and Sampat (2005), which provides a concise comparative analysis of both the USA and international experiences[3]. The Triple Helix conception of university-industry-government relations offers a range of constructive ideas that cast fresh light on how the roles of each of these main actors have been gradually transformed through evolutionary processes (Leydesdorff and Meyer, 2006). The Triple Helix concept also provides a comprehensive framework in which to study the new role of universities in practical terms, noting the tensions that emerge as the core responsibility for training human capital to carry a knowledge-based society forward conflicts with various profit motives and drivers of a Mode 2 approach to research (Nowotny et al., 2001; Etzkowitz and Leydesdorff, 2000). The body of literature that has emerged in this field of research during the last two decades has provided a set of theoretical and methodological approaches for understanding the role of universities in advanced economies and the influence of policies designed to enhance the commercialization of technology through university-industry linkages. International experience thus suggests that the effectiveness of TTOs depends to a considerable degree on the organizational set-up and responsiveness of such units vis-a`-vis industry partners (Siegel et al., 2003). Research on the universities’ role in Hong Kong’s innovation system is scarce. Parayil and Sreekumar (2004) provided an overview of the development of innovations in Hong Kong based on the Triple Helix concept, but they focus on overall issues and employ very limited empirical evidence pertaining to university-industry linkages. Similarly, a recent study by Mok (2005) summarizes recent policy changes related to entrepreneurship and university spin-off firms in Hong Kong – again utilizing the Triple Helix concept – but similarly without significant empirical research results. On the other hand, articles published by Patchell and Eastham (2001, 2003) have provided more detailed empirical evidence about the various factors influencing linkages between universities and industry in Hong Kong. Their analysis primarily reports the results of a survey of staff at HKUST on incentives and barriers to such linkages. Chan and Lau (2005) provide a study of technology incubators focusing on business development data for six technology start-ups. Most of these start-ups were set up by university research graduates from the Polytechnic University of Hong Kong. We believe that it is necessary to understand technology transfer from universities to the commercial sector within a broader context, as argued by Carlsson and Fridh (2002) on the basis of their investigation of offices of technology transfer in

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12 universities in the USA. Carlsson and Fridh found that the success of a technology transfer process depends not only on the interface between the university and the business community, but also on the receptivity to technology transfer that characterizes the surrounding community as well as the culture, organization and incentive structures in the universities themselves. There is, in other words, a mutual relationship between the broader innovation system and the TTOs within which Hong Kong’s TTOs operate. We can therefore conceptualize the TTO as occupying a position between the universities and industry, as shown in Figure 1. The institutional setting in Hong Kong Linkages between universities and industry in Hong Kong have traditionally centered on the provision of human resources – particularly engineering talent for R&D and innovation in private industry – and little else. Increasingly, local universities have sought to extend their cooperation with business firms in Hong Kong. These efforts have included establishing specialized units to promote technology transfer or support for entrepreneurial spin-off firms that commercialize university research (Mok, 2005, pp. 544-6). In the early stages these efforts responded primarily to a parent university’s interest in generating revenue. Gradually, however, as the broader institutional environment has been transformed with Hong Kong’s innovation system, there has been an increased recognition among the TTOs that their roles need to be less short-sighted and money-centred as well as broader in scope and more persistent. The advent of a new innovation policy since the late 1990s has further reinforced efforts to promote the development of new technology (Baark and Sharif, 2006a, b).

University Policies and Institutions Research output

Consultancy by university faculty

Patent applications

Contract research

TTO

Spin-off Firms

Recipient Firms Incubators Community Institutions

Figure 1. TTOs as Interface mechanisms: institutional embeddedness

TTO: UICP: VC: GEM:

Technology transfer office University-Industry Collaboration Program Venture capital Growth Enterprise Market

Collaborations UICP VC GEM

In particular, a HK$5 billion Innovation and Technology Fund (ITF) was set up on November 1, 1999 in accordance with the planning proposed in the two Commission on Innovation and Technology reports of 1998 and 1999. This initiative – to finance projects that strengthen research capabilities in Hong Kong and increase research spending on R&D projects in the business sector – was the single most important initiative in terms of both financial clout and impact on innovation-related activity in Hong Kong. Implementing the related policy has resulted in the establishment of new science and technology infrastructure, but more importantly in government-sponsored incentives – notably the University-Industry Collaboration Programme (UICP) – for the promotion of university-industry links[4]. Despite such laudable government efforts in the late 1990s, we cannot discount the effect of the broader institutional setting within which both universities and the private sector operate and co-operate. This institutional framework surrounding university-industry linkages is shaped by various channels for raising capital for technological upgrades or new innovative technologies. Below, we provide a brief overview of the government-sponsored incentives, the salient features of university-industry collaboration, and of the broader institutional setting.

Mobilizing technology transfer 51

Government-sponsored incentives Funding of new technology development projects by the ITF has sought to enhance linkages among research groups in universities and private industry. One of the four programs under the ITF rubric, the above-mentioned UICP, aims to expand network creation between universities and industries. As Table I shows, by March 31, 2007 there were 164 UICP projects (out of a total of 947 projects in total under the ITF) with funding amounting to a total of HK$186.3 million (out of a total of HK$2,834.4 million funded by the ITF), and each of these projects was approved on the basis of the participation of an industrial firm in a collaborative arrangement with a university. UICP support is given as a grant, subject to a cash contribution by the company amounting to no less than 50 percent of the project cost. Table I shows that 87 percent of UICP projects involved one industrial partner while 13 percent involved two or more partners. UICP projects explicitly make cooperation between universities and industry a major objective. These projects aim to leverage the knowledge and resources of universities to stimulate private sector interest in R&D. Projects funded under another component of ITF, the Innovation and Technology Support Programme (ITSP),

Program

Funds approved Number of approved projects (HK$ million)

Innovation and Technology Support Program General Support Program University-Industry Collaboration Program Small Entrepreneur Research Assistance Program Total Note: Figures are given in parentheses are percentages Source: ITF web site (www.itf.gov.hk)

441 84 164 (17.3) 258 947

2,281.8 108.7 186.3 (6.57) 257.6 2,834.4 Table I. ITF approved projects

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are intended to promote the development of new technology rather than cooperation as such. Nevertheless, if the technology developed through ITSP projects should succeed in the commercial application of new technology in industry, it would be appropriate to achieve a high level of collaboration for the purpose of ensuring active industry participation and benefits. As Table II shows, the majority of projects under the UICP program fall into the information technology area (42 projects with a total funding amount of HK$49.1 million), manufacturing technology (34 projects with a total funding amount of HK$20.8 million) and electrical and electronics (34 projects with a total funding amount of HK$31.2 million). University-industry collaboration in Hong Kong Information about collaborative projects promoting the development and application of new technology is collected as part of the Census & Statistics Department’s (2006) Annual Survey of Innovation Activities in the Business Sector (ASIA). The 2005 survey indicates that approximately half of the firms that engaged in R&D activities cooperated on R&D, mostly with other business firms in Hong Kong (31 percent) or the PRD (25 percent), but also with overseas firms (20 percent). In contrast, cooperation with higher education institutions in Hong Kong and the PRD was reported by only about 6 percent of the sample. Cooperation on R&D activities has grown in the private sector in Hong Kong. Table III shows data extracted from the ASIA surveys from 2001 to 2004. The figures reported demonstrate that although Hong Kong manufacturing firms have experienced a declining share in cooperative arrangements, the “wholesale and retail,” as well as the “finance” sectors have both witnessed a dramatically increasing share of cooperative arrangements from 2001 to 2004. Part of the explanation for this is that the sector designated “wholesale and retail” includes a very substantial number of Hong Kong-based firms engaged in manufacturing in the PRD (designated “Import-Export” firms in the survey). These firms have clearly expanded their level of cooperation related to R&D, including with higher education institutions. A similar,

UICP

Table II. Distribution of approved projects under the UICP program

Technology area

No.

HK$mn

Information technology Electrical and electronics Manufacturing technology Biotechnology Chinese medicine Materials science Environmental technology Nanotechnology Others Total (HK$ millions)

42 34 34 19 15 11 8 1 – 164

49.1 31.2 20.8 30.5 26.9 6.7 19.6 1.5 – 186.3

Source: ITF web site (www.itf.gov.hk)

Total for four ITF programs No. HK$mn 295 227 146 87 26 38 37 19 72 947

866.9 716.9 510.8 219.2 70.9 77.6 67.4 206.7 98.5 2,834.4

17 30 30 21 22 27 19 39 40 16 170 55

90 2 8 6 1 13 5 18 26 5 10 46

685 237

8

275 36

7

17 9

9

27 16

10

Type of collaborating organization Higher education Within group business institutions firms

217 193

31

62 62

17

24 34

14

21 25

10

Other business firms

107 67 56 34 54 61 38 345 225 50 1,068 421

3 6 4 0 1 1 3 2 104 1 25 18

Others Overall

Notes: aOnly selected sectors are presented in the above table; bwholesale and retail include wholesale, retail and import/export trades, restaurant and hotels; cfinance includes financing, insurance, real estate and business services Source: ASIA for 2001 to 2004, conducted by Census and Statistics Department, HKSAR

2001 Manufacturing Wholesale and retailb Financec 2002 Manufacturing Wholesale and retailb Financec 2003 Manufacturing Wholesale and retailb Financec 2004 Manufacturing Wholesale and retailb Financec

Industry sectora

Government and quasi-government organization

Mobilizing technology transfer 53

Table III. Patterns of R&D-related collaboration by Hong Kong firms, 2001-2004

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but less extensive, pattern can be observed in the increasingly innovative finance and business services sector (not indicated in the table). Broader features of Hong Kong’s institutional setting The broader elements of the institutional setting in Hong Kong within which TTOs function and are strongly embedded include, first, the reluctance of the banking industry to provide support for innovation and technology ventures. Technology and innovation-related start-ups rely heavily on personal savings in lieu of readily available business loans. In practice, large firms are typically better able to demonstrate creditworthiness and are therefore favored in terms of loan disbursement. In the absence of bank financing, one would expect the venture capital industry to come to the rescue of university-industry collaborative projects. Despite its status as the largest venture capital center in Asia, Hong Kong is most distinctively an administrative hub serving the region: So in 2000, 91 percent of all funds under management by venture capital firms originated outside Hong Kong, and the bulk of these funds financed companies in the broader region, principally in Mainland China. Given the comparative lack of development of the mainland’s capital market, most venture funds pursue their exit strategies outside China, mainly through Hong Kong’s main board and the Growth Enterprise Market (GEM), as well as the US’s Nasdaq exchange. Hong Kong serves therefore more as a regional centre than as an actual, primary investment target for venture capitalists. The aforementioned GEM offers a channel through which innovative and high-growth companies with short histories and little or no proven record of profitability can seek equity funding to capitalize on new opportunities by raising expansion capital under a well-established market and regulatory infrastructure. Hong Kong also features formal legislation that protects already existing innovations. For example, the Intellectual Property Department fosters local awareness of intellectual property rights and encourages respect for the rights of others. The government’s support of patent applications is administered and assisted by the Innovation and Technology Commission, while the enforcement of intellectual property rights falls to the Customs and Excise Department. Legal provisions for protection of intellectual property rights are clear and transparent enough as written. Empirical case study findings: two technology transfer offices at Hong Kong universities We have, as noted in the introduction, focused on TTOs established in two universities: HKUST and City U. We chose to focus on these two particular TTOs because of a combination of three factors: (1) History. City U’s TTO has the longest history in Hong Kong, while HKUST’s TTO is the youngest among those of the three research-heavy universities. (2) Success. City U’s TTO has a leading spin-off company that serves as an exemplar for other TTOs, whereas HKUST has recently begun to engage in new, entrepreneurial modes of engagement with its incubates. (3) Links to local industry. Whereas the two other major universities – the University of Hong Kong and the Chinese University of Hong Kong (CUHK) – have strong links with industry, those links are broader in scope.

This is not a shortcoming of the two universities, but by offering a wider range of academic programs and specialties, they are unable to achieve the same degree of depth or sharpness in focus as either City U or HKUST. The latter therefore are better able to achieve excellence in engineering research and, accordingly, in new innovative and technological spin-offs (under the broad spectrum of engineering sciences). In each of the two cases, we interviewed key personnel at the TTO and also those at the partner companies with experience in utilizing the TTOs’ services. We believe such a “symmetrical” or “rounded” approach allows us to attain a better understanding of the efficacy – or lack thereof – of the TTOs in question.

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Hong Kong University of Science and Technology (HKUST) Technology Transfer Center (TTC) HKUST’s Technology Transfer Center (TTC) and the HKUST Research and Development Corporation Ltd (RDC) engage in university-industry collaboration, R&D partnerships, and the protection and licensing of intellectual property. HKUST’s TTC has prioritized three major functions (each investigated in detail below). Promotion of intellectual property rights. HKUST’s TTC seeks to promote technology transfer via licensing of the university’s intellectual property. The key instrument for this process is patenting. The cumulative stock of patent applications rose from about 25 in 1996/1997 to around 250 in 2004/2005, as shown in Figure 2. For the academic year 2005-2006, the TTC was involved in the evaluation of 48 invention disclosures from HKUST researchers. During the same period, the Center arranged for the filing of 77 patent applications, including full and provisional applications with the US Patent Office, continuation-in part (CIP) patents, and international filings. In order to raise awareness among HKUST researchers about the possibilities and requirements of patenting, the TTC also arranged several seminars with US patent attorneys specializing in patent and other forms of intellectual property protection in the USA and abroad. During the current academic year, HKUST also

Number of Patent Applications

250 200 150 100 50

05 /0 6

04 /0 5

03 /0 4

02 /0 3

01 /0 2

00 /0 1

99 /0 0

98 /9 9

97 /9 8

96 /9 7

0 Year Cumulative (Pending)

Cumulative (Granted)

Source: HKUST Technology Transfer Center website (http://www.ttc.ust.hk/)

Figure 2. Patent applications at HKUST, 1996-2005

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received notification of the granting of 9 patents. Marketing of HKUST intellectual property remains at the core of TTC objectives, and this activity has been expanding steadily over the years. Research contracts. Marketing the university’s expertise to local and international industrial partners, for instance, via a web-based database of research capabilities and projects, is aimed at securing additional funding for highly productive research groups at HKUST, but it also ensures that the results of research projects are implemented in the market. In this area, the TTC cooperates with the HKUST RDC, which was established in 1993 as the business arm of HKUST, dealing with activities relating to the exploitation and commercialization of research conducted at HKUST. The number of research contracts with industrial clients and the total income from these contracts has grown steadily over the years. In 2003-2004, for example, the RDC signed 98 contracts worth a total of HK$19 million; in 2004-2005, the figures were 105 contracts at a total value of HK$31.9 million; while in 2005-2006 the RDC signed 118 R&D contracts with industrial clients, worth more than HK$35 million. During the most recent academic year for which figures are available, 2005-2006, the RDC licensed 24 patents that were assigned to HKUST. This included, for example, catalytic nanotechnologies for the removal of biologically active indoor air contaminants that have been patented and licensed to Chiaphua Industries Ltd for use in appliances that are now in the marketplace. These nanotechnologies have also been licensed to Artenano Ltd, an HKUST spin-off company, for the production of nanostructed catalysts, again for indoor air-quality applications. Entrepreneurship program. The HKUST Entrepreneurship Program was introduced in 1999 to assist faculty, staff and students in the establishment of technology-based start-up companies. It is HKUST’s policy to promote such activities for the benefit of Hong Kong’s economy and society. Start-up companies are incubated in the privately-funded Annex Building at HKUST, where they are provided with serviced and furnished space at modest cost, with access to university facilities and resources and to an Advisory Committee that provides assistance with business development. The Entrepreneurship Center currently comprises 1,200 square meter. During 2007, HKUST will be opening its new Enterprise Center, constructed with a donation from the Hong Kong Jockey Club, which will serve as the primary interface between the academic and research community at HKUST and the business and industrial environment of Hong Kong and the region. The university takes as a base a 3 percent equity stake in companies accepted into the Entrepreneurship Program. The transfer of intellectual property to the company usually increases equity. Such equity is held by the RDC on behalf of HKUST. The RDC also manages a modestly sized (HK$10 million) Venture Capital Fund. Start-up companies may seek funding to advance their business development. While the process for entry to the Entrepreneurship Program is designed to give companies the opportunity to prove their potential, an application to the Venture Capital Fund is subject to a more rigorous review process, as this involves a business decision to invest the assets of RDC. Evaluation. Concentrated focus on activities related to intellectual property development has led some to criticize HKUST’s TTC for neglecting other forms of assistance to start-up companies. In particular, start-ups struggle to find industrial partners – otherwise known as “tie-ins” with manufacturers – with the desired level of expertise to match the firm’s technical competencies. This was the view of an HKUST

start-up formed in July 2001 (and currently in operation) which develops microdisplays. The chief executive of the microdisplay company contends that the focus of HKUST’s TTC on building a patent portfolio may cause it to overlook smaller companies such as theirs which specialize in extracting the benefits of single (or a small number of) patent(s). Having drawn on the TTC’s services in the past, the microdisplay manufacturer now prefers to go it alone, engaging with the TTC at only a superficial level to gain access to HKUST resources such as laboratories and equipment, and for proper documentation of practices and procedures. A second characteristic of HKUST’s TTC that our microdisplay manufacturerrespondent sees as a drawback is its excessive focus on protecting the university’s interests first and foremost. While clearly acknowledging that the TTC is a HKUST-owned and -funded centre, and is therefore bound by its charter and mission goals to uphold the university’s interests, our respondent feels that, during the initial stages of setting up a high-tech start-up, the newly formed company is akin to a little baby needing concentrated attention, assistance, and resource inputs. The TTC’s emphasis on upholding HKUST’s requirements and regulations results in its not sufficiently addressing how its requirements or goals conflict with, align with, complement, or affect the start-up’s goals. It was this feature that led to our respondent’s disengaging from the TTC after a brief engagement. This failure to fully analyze its relationship to start-ups naturally reduces the TTC’s responsiveness to the start-ups’ needs. In our respondent’s case, for example, an engineer from a related industry had approached the HKUST start-up to develop an integrated circuit display in cooperation with the HKUST microdisplay manufacturer. In this case, training and knowledge transfer – but no intellectual property – was involved. Three months passed before HKUST’s TTC approved of this arrangement for cooperation, an excessively long delay that ultimately caused the industry partner to withdraw from the arrangement. Such an experience indicates that the TTC is better-suited to projects in the early stages of research within a longer time frame, particularly projects involving intellectual property generation. The TTC is not, then, as well suited to shorter-term product development projects in which intellectual property has no part to play but rather where the circumstances require a nimble and timely response to an industry’s needs. Recent developments. Notwithstanding the success of activities related to intellectual property development and licensing, contract research, and the promotion of entrepreneurship, the Director of HKUST’s TTC, Professor Matthew Yuen, has tried to intensify the university’s efforts to develop sustainable routes for the commercialization of technology developed at the university. This strategy aligns with changes in the broader environment for innovation and technology development in Hong Kong and also serves as a response to some of the TTC’s current shortcomings. As the government and other innovation actors have gradually focused more intently on university-industry collaboration and a general climate that recognizes – and to a degree respects a little more – the importance of innovation and technology, and the broader innovation system has begun supporting and rewarding industry’s efforts to collaborate with universities (and vice versa), HKUST’s TTC has been reorienting. Taking a more proactive approach, the TTC has sought to develop a new framework around the take-up of technology by industry that moves beyond the simple spin-off model. This approach emphasizes the mobilization of a social network

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of business managers who are keen to aid the commercialization process and are willing to cooperate closely with the university’s faculty members and post-graduate students to bring the technology to a stage at which it can be launched on the market. The managers attract investment that is the augmented by a substantial matching investment made by the RDC (which then claims a larger equity share in the resulting enterprise). These new forms of joint venture provide a much more professional environment within which to commercialize technologies. City University of Hong Kong (City U) Technology Transfer Office The City Polytechnic of Hong Kong – the former embodiment of the City U – was in fact the first Hong Kong organization of higher education to recognize the importance of technology transfer in the late 1980s[5]. By setting up a wholly owned company called City U Enterprises Limited in 1991, City U was the first Hong Kong tertiary institution to recognize the importance of commercializing newly found knowledge or technologies and applying them to the industrial sphere by establishing a dedicated TTO for the purposes of technology transfer. As is the case with other universities funded by the University Grants Council (UGC) in Hong Kong, City U’s primary goal is the provision of tertiary education. City U established its TTO very much with the intention of avoiding conflicts as a result of its involvement with business/industrial partners. City U began by investing its own money in City U Enterprises with the mission of commercializing its faculty’s research and technology development through business ventures. In 1992, City U set up what it called the Industrial Business and Development Office (IBDO). The main aim of the IBDO is to help start-ups. In 1992, the IBDO helped set up four companies. Eight years after its establishment (by 2000), the IBDO had helped set up more than 30 companies. These companies have worked closely with City U in the transfer of knowledge and resources. The new technology developed by researchers at City U form the foundation for these companies. The primary goal of City U’s TTO is to promote the transfer of advanced technologies and know-how developed in City University to enhance the competitiveness and development of local industries[6]. In particular, City U’s TTO has prioritized three sets of functions (each examined below). Funding for applied research. As City U was formerly a technical college that provided training in engineering subjects to post-secondary students, it has carried over the tradition of cooperation with local manufacturing and service sectors in applied research as well as in programme design and delivery, particularly in the electronics industry. In this connection, the TTO functions as an administrator of funding for applied research projects. Promotion of intellectual property rights. Similarly to HKUST’s TTC, City U’s TTO seeks to promote technology transfer via licensing of the university’s intellectual property. The key instrument in this process is patenting. As of June 30, 2005, the University has received 46 patents with protection in the USA, China, Europe, and Hong Kong, while another 66 patents are pending. Technology licensing. Although technology licensing is relatively new to Hong Kong, City U emphasizes technology transfer with a view to sharing the technologies and know-how developed on campus with industry and public/private sector organizations. City U has granted licenses to local and overseas companies.

For example, a technology for a Chinese lexical database, with lexical entries from six Chinese speech communities, has been licensed to a US company that provides software solutions for multilingual text mining and information retrieval applications. A particularly successful case of technology developed at City U and commercialized in a spin-off company is TeleEye. Founded in 1994 by the City University of Hong Kong and a group of engineering researchers, the TeleEye Group is principally engaged in the development, sales and marketing of innovative network CCTV and DVR devices that make use of advanced signal-processing technologies. The TeleEye Group has become a world-class supplier of remote visual management systems with extensive application in several industries. TeleEye Holdings Limited was listed in the Stock Exchange of Hong Kong Limited in 2001. Signal Communications Limited, a wholly owned subsidiary of TeleEye Holdings Limited, is the main operation arm of the TeleEye Group. The Group is the first publicly traded spin-off from an academic institution in Hong Kong. The listing further enhanced TeleEye’s brand awareness, marking a historical moment as TeleEye was the first hi-tech company nurtured by a local government-sponsored university in Hong Kong. Evaluation. The smaller-scale approaches of City U’s TTO, combined with a deep level of engagement, has helped it yield positive results and acquire a strong, well-deserved reputation. Our interview with TeleEye typified the high esteem in which many hold City U’s TTO. In particular, the TTO was most influential in aiding TeleEye by providing business advice to TeleEye rather than technical advice. There is an obvious distinction between the two domains, but they constitute two sides of the same coin: in commercializing university research: neither domain of knowledge can be put into practice effectively without the other. This issue was one that Dr Cliff Chan, CEO of TeleEye, recognized from the outset. As an engineer himself, Dr Chan and his research colleagues had ample knowledge of the technologies they (and their students) were working with and trying to develop. In fact, start-ups are so consumed with a passion for and interest in developing technologies that they rarely have the right type of people to see beyond the technological aspects of their work. This is where the TTO comes in. In the case of TeleEye, for example, the engineers developing the technology were intimately familiar with the technical aspects of their products, but they were less familiar with the business dimension involved in establishing a company. They needed someone to help them write a persuasive business plan, present a business model, handle marketing and sales, and handle issues of management, conflict, negotiation, and publicity. City U’s TTO assisted with the business side by arranging opportunities for TeleEye that the founders with their engineering background would have been unable to create on their own. One microcosmic example that illustrates the value of City U’s TTO to TeleEye was the TTO’s assistance in helping them to achieve credibility. City U’s accounts were audited by the accounting firm KPMG. When TeleEye was first established in 1994, it had only three full-time staff members. Normally, such a small company would have passed under the radar of major accountants such as KPMG. As a result of the assistance it received from the TTO, however, TeleEye’s accounts were audited by KPMG from the very first day. The credibility gained from having one of the most reputable accounting firms audit TeleEye’s accounts carried over to its listing on the Hong Kong Stock Exchange, by which time investors had a much higher degree of

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confidence in TeleEye’s books (and not only their technologies), resulting in a swifter and more successful initial public offering. On the other hand, City U’s TTO’s assistance to TeleEye was not continuous and persistent. Rather, there were “spurts” of intense assistance. One such period occurred in 1994 (lasting two years) when the four TeleEye founders submitted their original business proposal to City U. The TTO director and staff worked to convince the university’s administrators to approve the plan. After the plan was accepted and TeleEye established, the amount of assistance offered by the TTO decreased. Thereafter, when TeleEye went public in May 2001, there was, once again, intensive assistance from the TTO when they arranged for investors, sponsors, financial institutes, lawyers, and accountants. Recent developments. City U’s TTO has undoubtedly benefited from the success of TeleEye, particularly its listing on the Hong Kong Stock Exchange, an event that earned the TTO much positive publicity. Despite this success, the director of City U’s TTO, Mr Wong Hon-yee, does not see the TTO resting on its laurels. In particular, Mr Wong recognizes the importance of being even more proactive in nurturing the research interests of faculty so as to encourage more start-ups and spin-offs. He points to recent changes in Hong Kong’s innovation system (notably in the government’s attitude and the role of universities in society) as an indication that universities will have to do much more to “justify” their role as one of the main expenditure sources in society. No longer can the contribution of universities in Hong Kong be assessed solely on the basis of the quantity and quality of academic publications (and secondarily, teaching performance). Rather, other forms of benefit to society have to be identified and publicized. This in turn means that universities must devise methods for assessing their performance based on their role in generating new knowledge/technology that benefits society. Ultimately, a model of university structure that encourages entrepreneurship is required, one that more openly and robustly provides financial incentives to professors for generating and transferring new technologies. Analysis and discussion TTOs are relatively new phenomena in Hong Kong. However, their growing importance is not to be underestimated. As the Hong Kong Government actively attempts to strengthen its innovation system (particularly in the post-1998 period), coupled with the increasing expectation that universities are to rely more on non-government sources of funding, TTOs are gradually increasing the scope of their role as well as their importance, partly as a result of learning from prior errors. University researchers in Hong Kong are, generally speaking, relatively unaware of the needs of local industries. Although there has been a tradition of rewarding academic excellence in Hong Kong on the basis of research publications, an emphasis on the transformation of new knowledge into applications that meet the needs of local industries is a relatively new phenomenon. Until quite recently, few of Hong Kong’s academics possessed the requisite skills and technical and business wherewithal to successfully interact, cooperate and profit from partnerships with industrial partners. This only increases the need for TTOs to play a more active role, especially if universities are to become more active in developing industrial links.

TTOs in Hong Kong have been in the process of transition for the last decade and a half. This transitionary format has been mirrored in the wider innovation system, which also has been undergoing change in the post-1998 period (Sharif, 2006). The exploratory, empirical case studies presented in this paper make it possible for us to discern a development trajectory for Hong Kong’s TTOs, which we can divide and describe in detail in three phases. In the first phase (in the early 1990s), the establishment and running of the TTOs was marked generally by a short-term perspective. Such a perspective was characterized by an emphasis on financial gains that the TTO could generate: in other words, generating revenue was the TTOs’ chief priority. This reflected an inadequate emphasis on innovation and technology in general, and university-industry collaboration projects in particular. Therefore, while maintaining their function as a bridge between university and industry, Hong Kong’s TTOs concentrated on revenue and profit generation, at first assisting only those projects they believed would bolster the bottom line. There was little consideration of the alternative roles the TTO could perform, and little appreciation that the TTO could also be proactive rather than reactive in achieving its mission. In the second phase of the developmental trajectory (the mid-to-late-1990s), TTOs began slowly to realize that they needed to think more strategically and broadly about their role. In particular, the TTOs recognized that it was in their direct interests to ensure that the firms they helped as start-ups in fact survived and maintained financial stability over a number of years. Such a realization was in part a natural result of the first phase, in which large numbers of firms and projects were undertaken by the TTOs without their necessarily valuing long-term viability. As the TTOs’ projects began to mature and rapidly wither with increasing regularity, the TTOs realized that it served neither their own interests nor those of the companies if these projects and companies were so short-lived. During this phase, then, deeper consideration was given to: . vetting projects for their long-term feasibility; . drawing up and implementing measures to support the longer-term development and growth of supported projects; and . regularly appraising projects years after their initiation (three years and beyond) to evaluate their performance. Concomitantly, during this phase, public attention to the importance of technology, especially the transfer of technology from university to industry as well as the promotion of innovation broadly speaking, began to take hold more firmly locally. We observe that, during the third and final phase of the TTOs’ development trajectory (the late 1990s and early 2000s), the wider social and institutional setup in Hong Kong changed, whereby TTOs assumed greater importance as a result of multiple and simultaneous changes taking place in Hong Kong’s innovation system. These changes came into effect in the late 1990s and early 2000s as a result of government measures intended to strengthen the local innovation system through: . a larger number of innovation and technology policy initiatives; and . greater financial investments in innovation and technology measures (for example, the ITF).

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The changing environment led to greater government support for the basic university-industry linkages promoted by local TTOs, which in turn encouraged them to become more entrepreneurial in nature. Nowhere has this transformation been captured better than at HKUST. As the experience of HKUST – Hong Kong’s youngest research-oriented university – shows, there is considerable scope for TTOs to proactively bridge the gap between university and industry. While City U’s TTO largely performs the traditional or “early-stage” roles of TTOs (that is, making academic research accessible to local industry), HKUST’s Entrepreneurship Program demonstrates a viable alternative means of operation whereby university research can be made practically useful. Furthermore, and importantly, the TTO can be the leader in this process by acquiring an equity stake in a partner company (as well as increasing the equity stake with the transfer of intellectual property), as did City U’s TTO with respect to TeleEye. The HKUST TTO’s establishment of its modest venture capital fund is another example of this form of creative collaboration. Both examples reinforce the conclusion that there is much room for TTOs to expand their roles. The development trajectory of TTOs, while to some degree arcing independently, is simultaneously strongly influenced by the social and institutional environment in Hong Kong. Therefore, in order to understand the role of TTOs in the academiaindustry nexus, we need to understand the wider innovation system within which these TTOs function – only then will it be possible to map the TTOs’ development trajectory accurately. In summary, while we have drawn tentative conclusions from our exploratory study, it is also apparent that Hong Kong’s TTOs are vastly understudied and that they should command greater attention not least because of the strength of the university sector in Hong Kong’s broader innovation system. While this paper builds on the works of Parayil and Sreekumar (2004), Mok (2005), and Patchell and Eastham (2001, 2003), further studies, including case studies like the ones we have presented, are in order to address the changing and more central roles TTOs have assumed within Hong Kong’s innovation system. Finally, if the Hong Kong Government’s desire to improve its innovation system is to materialize, one can expect the bridge between universities and industry to be a major focal area, one which the two TTOs examined in this paper are primed to exploit. Notes 1. Within the literature examining the role of universities in society, there has been extensive debate over the “Third Mission” or “Third Stream” activities in universities, designating the transfer of knowledge to society. Henry Etzkowitz has discussed this issue in relation to the Triple Helix (Etzkowitz et al., 2000). See also, Molas-Gallart et al. (2002). 2. Wallmark (1997) documented the case of Sweden’s Chalmers University of Technology, reviewing the rate of inventing, the characteristics of inventors, and the economic value of patents generated. Rogers et al. (1999) and Steffensen et al. (2000) investigated technology transfers in university-based research centers at the University of New Mexico. Harmon et al. (1997) mapped the technology transfer processes at the University of Minnesota to determine if the characteristics of these processes vary according to the size of the firms involved and according to whether new firms are created. Mowery et al. (1999) focused on three universities – Columbia, Stanford and the University of California – in their analysis of the effect of the Bayh-Dole Act on universities and the national innovation system.

3. Mowery et al. (2004) and Mowery and Sampat (2005) concluded that, although there was no doubt that the Bayh-Dole Act had created a new context for university-industry linkages, the actual implementation of university initiatives was shaped by the previous trajectory of university-industry relations at each university. In this sense, the act appeared to have reinforced rather than revolutionized existing trends in such relationships. 4. New innovation and technology-related infrastructure includes Cyberport and the Hong Kong Science and Technology Park Corporation (HKSTPC). Cyberport promotes entrepreneurship in information technology and media industries in a location close to the University of Hong Kong (Baark and So, 2006), while the HKSTPC has established science park facilities near another major research university, the CUHK. Moreover, the first public applied research unit in Hong Kong – the Applied Science and Technology Research Institute (ASTRI) – has made collaboration with both universities and private industry one of its key priorities. 5. The City Polytechnic of Hong Kong was founded in 1984. City University of Hong Kong was granted university status on January 1, 1995. 6. The TTO is the technology marketing arm of City University of Hong Kong. It serves as a bridge between the university and the industrial and business communities. It identifies collaborative opportunities with industrial and business enterprises in Hong Kong, in the region and in the global arena. The primary goal is to promote the transfer of advanced technologies and know-how that contribute to Hong Kong’s economic development. The formal objectives of City U’s TTO are: † to strengthen links with the industrial and business sectors, helping to project the university’s image and showcase its faculty members’ accomplishments in applied research; † to build fruitful partnerships with industrial and business enterprises through contract research and technology licensing; † to attract industrial funding and sponsorship to support the research endeavors of the university; and † to provide assistance to faculty members in commercializing their research results. References Baark, E. and Sharif, N. (2006a), “From trade hub to innovation hub: the role of Hong Kong’s innovation system in linking China to global markets”, Innovation: Management, Policy and Practice, Vol. 8 Nos 1/2, pp. 193-209. Baark, E. and Sharif, N. (2006b), “Hong Kong’s innovation system in transition: challenges of regional integration and promotion of high technology”, in Intarakumnerd, P., Lundvall, B.A. and Vang, J. (Eds), Asia’s Innovation Systems in Transition, Edward Elgar, Cheltenham, pp. 123-47. Baark, E. and So, A.Y. (2006), “The political economy of Hong Kong’s quest for high technology innovation”, Journal of Contemporary Asia, Vol. 36 No. 1, pp. 102-20. Carlsson, B. and Fridh, A.C. (2002), “Technology transfer in United States universities – a survey and statistical analysis”, Journal of Evolutionary Economics, Vol. 12 Nos 1/2, pp. 199-232. Census & Statistics Department (2006) Report on 2005 Annual Survey of Innovation Activities in the Business Sector, Hong Kong. Chan, K.F. and Lau, T. (2005), “Assessing technology incubator programs in the science park: the good, the bad and the ugly”, Technovation, Vol. 25, pp. 1215-28. Chapple, W., Lockett, A., Siegel, D. and Wright, M. (2005), “Assessing the relative performance of UK university technology transfer offices: parametric and non-parametric evidence”, Research Policy, Vol. 34 No. 3, pp. 369-84.

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Etzkowitz, H. and Leydesdorff, L. (2000), “The dynamics of innovation: from national systems and ‘Mode 2’ to a triple helix of university-industry-government relations”, Research Policy, Vol. 29 No. 2, pp. 109-23. Etzkowitz, H., Webster, A., Gebhardt, C. and Terra, B. (2000), “The future of the university and the university of the future: evolution of ivory tower to entrepreneurial paradigm”, Research Policy, Vol. 20, pp. 313-30.

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Franklin, S., Wright, M. and Lockett, A. (2001), “Academic and surrogate entrepreneurs and university spin-out companies”, Journal of Technology Transfer, Vol. 26 Nos 1/2, pp. 127-41. Harmon, B., Ardishvili, A., Cardozo, R., Elder, T., Leuthold, J., Parshall, J., Raghian, M. and Smith, D. (1997), “Mapping the university technology transfer process”, Journal of Business Venturing, Vol. 12 No. 6, pp. 423-34. Leydesdorff, L. and Meyer, M. (2006), “Triple Helix indicators of knowledge-based innovation systems: introduction to the special issue”, Research Policy, Vol. 35, pp. 1441-9. Lockett, A. and Wright, M. (2005), “Resources, capabilities, risk capital and the creation of university spin-out companies”, Research Policy, Vol. 34, pp. 1043-57. Lockett, A., Wright, M. and Franklin, S. (2003), “Technology transfer and universities’ spin-out strategies”, Small Business Economics, Vol. 20 No. 2, pp. 185-201. Markman, G., Gianiodis, P., Phan, P. and Balkin, D. (2005), “Innovation speed: transferring university technology to market”, Research Policy, Vol. 34 No. 7, pp. 1058-75. Mok, K.H. (2005), “Fostering entrepreneurship: changing role of government and higher education governance in Hong Kong”, Research Policy, Vol. 34, pp. 537-54. Molas-Gallart, J., Salter, A., Patel, P., Scott, A. and Duran, X. (2002), Measuring Third Stream Activities (Final Report to the Russell Group of Universities), Vol. 85, Science and Technology Policy Research (SPRU), Brighton. Mowery, D.C. and Sampat, B.N. (2005), “Universities in national innovation systems”, in Fagerberg, J. et al. (Eds), The Oxford Handbook of Innovation, Oxford University Press, Oxford. Mowery, D.C., Nelson, R.R., Sampat, B.N. and Ziedonis, A.A. (1999), “The effects of the Bayh-dole act on US university research and technology transfer”, in Branscomb, L.M., Kodama, F. and Florida, R.L. (Eds), Industrialising Knowledge: University-industry linkages in Japan and the United States, Harvard College, Cambridge, MA. Mowery, D.C., Nelson, R.R., Sampat, B.N. and Ziedonis, A.A. (2004), Ivory Tower and Industrial Innovation, Stanford University Press, Stanford, CA. Nowotny, H., Scott, P. and Gibbons, M. (2001), Re-thinking Science: Knowledge and the Public in an Age of Uncertainty, Polity Press, London. OECD (2006), Main Science and Technology Indicators (MSTI), 2nd ed., OECD, Paris. Parayil, G. and Sreekumar, T.T. (2004), “Industrial development and the dynamics of innovation in Hong Kong”, International Journal of Technology Management, Vol. 27 No. 4, pp. 369-92. Patchell, J. and Eastham, A.R. (2001), “Creating university-industry collaboration in Hong Kong”, in Felsenstein, D. and Taylor, M. (Eds), Promoting Local Growth: Process, Practise and Policy, Ashgate, Aldershot. Patchell, J. and Eastham, A.R. (2003), “Governance for university-industry collaboration in Hong Kong”, in Rutten, R.P.J.H., Boekema, F.W.M. and Kuijpers, E. (Eds), Economic Geography of Higher Education, Routledge, New York, NY.

Rogers, E.M., Hall, B.J., Hashimoto, M., Steffensen, M., Speakman, K.L. and Timko, M.K. (1999), “Technology transfer from university-based research centers – The University of New Mexico experience”, Journal of Higher Education, Vol. 70 No. 6. Rosenberg, N. and Nelson, R.R. (1994), “American research universities and technical advance in industry”, Research Policy, Vol. 23, pp. 323-48. Shane, S. (2002), “Selling university technology: patterns from MIT”, Management Science, Vol. 48 No. 1, pp. 122-37. Shane, S. and Stuart, T. (2002), “Organisational endowments and the performance of university start-ups”, Management Science, Vol. 48 No. 1, pp. 154-70. Sharif, N. (2006), “An examination of recent developments in Hong Kong’s innovation system: 1990 to the present”, Science and Public Policy, Vol. 33 No. 7, pp. 505-18. Sharif, N. and Baark, E. (2005), “The tamest of tigers? Understanding Hong Kong’s innovation system and innovation policies”, International Journal of Technology and Globalization, Vol. 1 Nos 3/4, pp. 462-79. Siegel, D. and Phan, P. (2005), “Analyzing the effectiveness of university technology transfer: implications for entrepreneurship education”, in Liebcap, G. (Ed.), Advances in the Study of Entrepreneurship, Innovation, and Economic Growth, JAI Press, Amsterdam. Siegel, D.L., Waldman, D. and Link, A. (2003), “Assessing the impact of organizational practices on the relative productivity of university technology transfer offices: an exploratory study”, Research Policy, Vol. 32, pp. 27-48. Steffensen, M., Rogers, E.M. and Speakman, K. (2000), “Spin-offs from research centers at a research university”, Journal of Business Venturing, Vol. 15 No. 1, pp. 93-111. Thursby, J.G. and Kemp, S. (2002), “Growth and productive efficiency of university intellectual property licensing”, Research Policy, Vol. 31 No. 1, pp. 109-24. Wallmark, J.T. (1997), “Inventions and patents at universities: the case of Chalmers university of technology”, Technovation, Vol. 17 No. 3, pp. 127-39. About the authors Naubahar Sharif is an Assistant Professor in the Division of Social Science, The Hong Kong University of Science and Technology. He received his PhD degree from the Department of Science and Technology Studies (S&TS) at Cornell University. In his current research program, he is investigating the development of and changes in Hong Kong’s innovation system. He has published in a variety of journals, including Research Policy, Science and Public Policy, and the International Journal of Technology and Globalisation. Naubahar Sharif is the corresponding author and can be contacted at: [email protected] Erik Baark is a Professor in the Division of Social Science and Acting Dean of the School of Humanities and Social Science, The Hong Kong University of Science and Technology. He received his PhD degree in Information and Computer Science from the University of Lund in 1986, and was awarded a Dr Phil. Degree at the Faculty of Humanities, University of Copenhagen, in 1998. His primary interests include comparative studies of the innovation systems and policies in China, recently focusing on the innovation system in Hong Kong. He has also published research on the role of innovation in service industries, with a focus on the engineering consultancy sector.

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William H.A. Johnson and Joseph W. Weiss Management Department, Bentley College, Waltham, Massachusetts, USA Abstract Purpose – The purpose of this paper is to present a conceptual stage model of education and innovation type. The model depicts the influence of education on innovation and the paper aims to discuss the implications of it for the national competitiveness of China. Design/methodology/approach – The paper presents a newly created conceptual stage model of education and innovation supported by observations and a literature review based on past and present innovation efforts in China. Findings – The paper demonstrates the importance of linking creative education with radical innovation that is associated with higher value-added economic activities. The findings of the empirical studies to date in China suggest that such a change will not be easy. There is a need to increase the propensity towards creative thought processes even if this is considered “undesirable behavior” both in the Chinese classroom and for the Chinese Communist party. Evidence suggests that without such creativity, self-initiated radical innovation is not possible across a broader spectrum of the educational system, and that break-through inventions in value-added technology and design industries will be limited in China. Originality/value – The model in the paper is designed to stimulate further research, initiate discussion and encourage action on driving creativity in Chinese educational policy and practices. The paper’s analysis and findings will be of interest to managers and government policy makers in China that are charged with developing new programs to spur value-added innovation. Researchers will find the ideas for further empirical research potentially valuable in helping them to design studies surrounding the phenomena of creativity, education and innovation practices. Keywords China, Innovation, Education, Technology led strategy Paper type Conceptual paper

Introduction China’s economy has a growing population of 1.25 billion people and continues to expand exponentially with GDP expanding in recent years at greater than 9 percent annually. This growth has largely been attributed to services and the high-technology industry. For example, agriculture only accounts for 15.4 percent of China’s GDP (Chen, 2006), although it remains the dominate employer of the 753 million “working age” population (contributing to 50 percent of employment). However, despite the growing importance of technology industries to the Chinese economy, most of this

Journal of Technology Management in China Vol. 3 No. 1, 2008 pp. 66-81 q Emerald Group Publishing Limited 1746-8779 DOI 10.1108/17468770810851502

A previous version of this paper was awarded a Best Paper Award at the 10th International Conference on Global Business and Economic Development in Kyoto, Japan, August 2007. The authors would like to thank the Management Department at Bentley College and Nader Asgary, Director of Bentley’s Cronin International Center for contributing funds for our research presentation. Their gratitude is also extended to the anonymous reviewers at JTMC for their revision suggestions.

growth is due to the introduction of Western technology via foreign direct investment (Buckley et al., 2002; Liu and Wang, 2003). Nevertheless, China’s “cost innovation” strategy is proving effective as a global business model, to the extent of threatening Western competitive advantages (Zeng and Williamson (2007, p. 58) for their definition of “cost innovation” as the Chinese ability to “. . . apply scale-intensive technology to specialty products, transforming these businesses by dramatically reducing costs and prices and hence increasing volumes”). At the same time, however, it observed that: Most graduates from top universities in the United States or Europe are able to be productive from day one on the job. In China, such people are few and far between (McKinsey & Company, 2007).

The business and educational divide in China becomes more evident with time. To paraphrase the economist Joseph Alois Schumpeter, a new gale of discourse on effective innovation policies is being put forth that promises continued future growth for China. This paper joins, the discussion about this divide by focusing on the educational aspects of creative innovation in China. To continue a robust level of economic growth, China must, we argue, begin to take innovation seriously as a creative process in developing new technologies that are currently lacking. At the country level, this creative process is embedded in and to a large extent dependent on educational processes. Indeed, it may be argued that China presently lacks the propensity towards proactive innovation efforts that lead to new and different economic opportunities (Johnson, 2006; Zhan and Renwei, 2003). At this historical juncture, there is some consensus that the country relies too heavily on the imitation of technologies originally created and developed in the West. For example, foreigners accounted for over 60 percent of invention patents granted in China in 2006 (Hutschenreiter and Zhang, 2007, p. 248). We argue that, this imitative strategy – deliberate or not – may be a natural trajectory for the country based on its current education and innovation practices, which parallels progress-based theories that emphasize other factors of development (Mahmood and Rufin, 2005). Others have also argued that China is embarking on a fifth stage of its development away from imitation and cost-based innovations and towards a focus on creative innovation (Xie and White, 2006). This paper’s purpose is to examine one element, the link of education to creative innovation. Organization of the paper The paper begins by illustrating the current paradox between innovation and education in China. We then identify and explain a generic stage model of education and innovation that illustrates the importance of education practices in the processes of innovation. We argue that implementing this model can lead to the potential for creating various types of increasingly valued-added product and process innovations. In order to move up the value chain toward technologies that critical industries in the global marketplace need, we explain that more emphasis in policy and strategic direction on original and creative innovations is required. This emphasis also requires a focus on educational reform. While we focus on the link between education and innovation, there are other macro-economic and sociopolitical factors that affect innovation at the country level. Some have been discussed in Johnson (2006). We discuss these factors as they relate to

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our focus on the stage model of education and innovation and the model’s implications for national competitiveness. The implications of the model are first explored by discussing possible empirical applications of the framework. We then discuss the policy implications that emanate from the model. As with many current discussions on China, these implications appear to suggest further democratization in the country. Indeed, other studies suggest that for countries to move beyond newly developed status, they will require a freer press in general (Chen, 2006), a freer political system (Mahmood and Rufin, 2005), better, more protective innovation policy (Huang et al., 2004) and, as argued here, a freer, more liberal educational system. Otherwise, development may be hampered by lethargy of change and lack of creative, entrepreneurial activity (i.e. innovation) as seen in the economic collapse of the once mighty Soviet Union. Note that by innovation we mean the process of creative entrepreneurial activity which means creating a product or service that is new. We do not mean entrepreneurial activity in the sense of opening and running new businesses per se. This is akin to Schumpeter’s (1951) notion of creative destruction, which he saw as a necessary stage in continual economic growth patterns. The paper ends with an outline of potential empirical explorations of the concepts discussed here. Innovation and education in China: a paradox of factors Historically, China is a country of innovative activity that has provided many radical inventions. However, these were introduced hundreds of years ago such that China has currently been criticized as lacking a system and even a spirit of innovation (Zhan and Renwei, 2003). It is known that paper, the compass, gun powder and printing were all original Chinese inventions. This proud historical fact has prompted some Chinese schools to replace the portraits of the four bearded Westerners of Marx, Engels, Lenin and Stalin (who, of course, brought Communist philosophy to China) with the four bearded Chinese sages responsible for the “Four Great Inventions” mentioned here (Becker, 2000, p. 202). The question, which begs the issue of innovation in China and whose answer reveals one of many paradoxes in the country, is: “Why is China not known today for excellence in innovation?” Even though China’s “cost innovation” is acknowledged as a highly effective business model that threatens global competition, the increasing number of graduates from China’s educational system are not competitive with more advanced industrial countries (Zeng and Williamson, 2007). Now a question arises, “How sustainable is this industrial model vis a vis more innovative, long-term models? For example, Japan’s Theory Z was also considered a threat to American management practices in the 1980s. Innovation scholars cite the truism that “Necessity is the mother of invention” as having face and empirical validity. In the case of China, it has been argued that, the glorious inventions of China’s past can all be traced to fulfilling the needs of the bureaucratic establishments of the Chinese Emperor at the time (Johnson, 2006). For example, the classical inventions were not commercial in nature. Indeed, the lack of innovative behavior has been cited as a consequence of the absence of a free market, the values of Chinese society and its totalitarian nature (Landes, 1998, p. 55-7). Recently, and even a hundred years ago, China continues to be an entrepreneurial and commerce-driven country despite its recent historical leanings towards socialistic communism. (Indeed, this may be another paradox of the far east country, i.e. that it

can so easily embrace communism and capitalism at the same time.) However, much of the entrepreneurial activity in China is manufacturing and trade related. Much innovation taking place there is incremental in nature and based on imitation of imported technologies and processes. In fact, the following quote could be taken from the headlines of today’s business sections but is actually from a book published almost a century ago: It is often said that the peril of to-day is not the Chinese behind the gun, but the Chinese as the manufacturers of guns and of many other things, equally calling for the highest technical skill. It has been the fashion of newspaper writers dealing with the development of China to state that the danger to the West lies in the industrial expansion of China, and it is averred that the Chinese, with their cheap labour and keen aptitude for imitation, competing with the dear labour and the heavy cost of transportation of the West, would certainly be able to beat the latter. [sic] (Wagel, 1980, p. 291; originally published in 1914 by North-China Daily News and Herald, Shanghai).

This paradox has led to a rather peculiar understanding of innovation in China. Whereas China has been known as a place of great trade and entrepreneurial activity dating back to the days of the silk road, radical innovation has often been absent from the country’s rapid economic growth. Recently, the Chinese have had a reverence for innovation, without radically innovating. The same paradox can be seen in China with regard to education. Historically, the educated bureaucratic elite were given a great deal of respect. Perhaps, as a backlash to the historical reverence for the educated class, the cultural revolution of recent Chinese history relegated the educated class to “enemy of the state” status. Recently, a reversal of attitude has appeared as the links among education, economic growth and prosperity have become more evident. In fact, education in China is now seen as a way out of poverty as depicted in the story of a 13 year old Chinese girl from Zhangjiashu and her peasant family’s struggles to keep her in school because education leads to a better life (Haski, 2004). This paradox extends to the tension between the need for creativity in education and the need for conformance, which although also present in the Western context may be even greater in an Asian setting. For example, Kwang and Smith (2004) called this “the paradox of promoting creativity in the Asian classroom”. Kwang and Smith (2004, p. 308) described it this way: teachers (especially in the East) are encouraged to promote creativity in the classroom, yet many studies indicate that they do not like creative students. This is important to keep in mind as we introduce a stage model of education and innovation – a model that suggests the need for creative and critical thinking skills in order to help explain the link between education and innovation. To move up the economic value chain, it is important to become more creative. We return to creativity after explaining the model. A stage model of education and innovation type: concept and description The model, shown in Figure 1, links education with innovation practices that result in three different types of innovations: imitation, incremental, and radical. Innovation is defined here as introducing a new product or service and the types shown in Figure 1 are indications of the degree of “newness” based along a continuum from direct copying (imitation), in which the product/service is new to the firm but not the world, to unique designs (radical), in which the product/service is new not only to the firm but

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Ti

Critical Thinking-Based

Radical

Fact-Based

Mimetic-Based

Figure 1. Innovation types over time: the stage model of innovation linking education and innovation practices and processes

e

m

(Educational Practices)

Incremental

Imitation

Copy

Derivation

Original

(Innovation Practices/ Processes)

Sources: William H.A. Johnson and Joseph W. Weiss (2008)

also to the world. We argue by way of this stage model of education and innovation that there is a progressive link between evolutionary types of education program/stages and innovation practices. That is, the role of education will vary with the type of overall innovation needed and selected for continued economic development of the country. This reasoning parallels Mahmood and Rufin’s (2005) assertion that the role of government varies with the development process, and that development is linked with technological innovation. They assert that as a country becomes more developed economically it must move from derivational technological innovation towards more original innovation. The model here differs in that it focuses on linking the role of educational practices with innovation outcomes. We describe the two axes in the model first (Figure 1), then the three dimensions of each axis, and finally the resultant innovation types. The horizontal first axis depicts the type of technological innovation process associated with stages of development for innovative purposes. Technological innovation processes vary from direct copying without changes to the original design of the technology or process to derivation. These practices require some changes to the original design, including the original – which provides a newly created design for a technology or process. The vertical second axis illustrates educational practices associated with stages of education at the national level. These stages also relate to stages of individual learning. At the individual level, the model parallels the process of experiential learning as first proposed by Kolb (1984). In Kolb’s, 1984, p. 42 model learning practices move in a cyclical pattern from concrete experience, through reflective observation, abstract conceptualization to active experimentation. The education practices in the model tend to be hierarchical in that the level above usually also employs the methods of the

level below. Here, the basic educational practice is mimetic-based in which students learn to repeat and “parrot” the teacher without necessarily understanding the material. The next stage in educational practice is fact-based in which students both memorize and understand facts and their relations to one another. This type of educational practice is the baseline for higher levels of engineering skills. Finally, there is the level of educational practice involving critical thinking and creativity skills and aptitudes. Critical thinking is the mental process of actively conceptualizing, synthesizing, and evaluating information in order to reach a conclusion about that information. Critical thinking students not only know the facts of their discipline but also question the very nature and veracity of those facts. They also combine facts to create new possibilities as in Koestler’s (1976) concept of bisociation or by forming associative elements to create new combinations (Mednick, 1962). Furthermore, absorbing old knowledge from other disciplines and combining these with new knowledge may be beneficial to competitiveness for individual firms (Katila, 2002). Critical thinking skills allow one to separate the important knowledge from less relevant knowledge. Thus, critical thinking becomes a necessary component towards creative thinking. The graphical space bounded by the two axes depicts the resultant general innovation types (imitation, incremental, and radical) between education practices and innovation processes. We argue that, the model depicted here is progress-based so that over time if a country or region is to advance it must go through stages of education practices and technological innovation. The third axis is time. The actual innovation practices that can take place under certain conditions are seen on the horizontal axis. The different types of innovations (imitation, incremental, and radical) can be thought of as the adjectives describing a noun, which is the actual innovation. The two practices can be thought of as the verbs that lead to these nouns. For example, in order to create a new technological innovation that did not previously exist, a certain amount of critical and creative thinking and original practices are necessary. For instance, the first personal computers (for example, the Apple computer engineered by Steve Wozniak[1]) required creative manipulation of design to make them work. They were an example of creative innovation leading ultimately to a new industry that eventually changed almost every other existing industry. For simple innovations and also for detailed but highly explicit designs, such complex and original thinking may not be necessary. As such, mimetic educational practices are associated with mere copying and lead only to imitations of existing designs, however complex. Moving up the value chain of innovations, fact-based educational practices are associated with derivational innovation practices and produce incremental innovations, which are material improvements on existing technologies, for example, but not entirely new configurations or designs. Finally, critical thinking, educational and original innovation practices may result in radical innovations. Both of these practices are associated with creativity. Creativity is defined as the act or quality of creating some new that is useful and is thus synonymous with innovation as a process. The topic of creativity has been studied for more than a quarter century in the West (Angle, 2000). Both educational practices and innovation practices in the upper parts of our scale are related to creativity, which involves originality, as well as the ability to adapt, extend existing products/services, and realize the achievements of inventive thinking. Originality, as

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pointed out years ago, is not enough for useful creativity – particularly in the pragmatic situation of businesses and general economic growth. For example, MacKinnon (1975, pp. 67-8) stated: Novelty or originality, while a necessary part of creativity, is not sufficient . . . it must also be adaptive to reality. It must serve to solve a problem, fit a situation, or accomplish some recognizable goal. And thirdly, true creativeness involves a sustaining of the original insight, an evaluation and elaboration of it, a developing of it to the full.

Thus, critical thinking educational practices and original innovation practices require creativity. The model of education and innovation type in China While the stage model of education and innovation can be applied to any country or region (or even with individuals), the present circumstances of China are particularly well suited to the model’s application through empirical investigation. The model is relevant since China is presently at a crossroads in which it could be moving away from imitative innovation practices towards more radical, self-initiated innovation as it progresses economically. In fact, we argue that in order to continue advancing economically, China will have to make this transition, which has policy implications with regard to education practices, even reform, in China. Note that: . . . China will graduate another 4.13 million students from universities in 2006 (based on enrolments) and that there are 23 million people in some form of higher education plus a further 115,000 officially registered as studying abroad. China graduated over 500,000 engineers in 2005 (between two-and-a half and eight times more than came out of US engineering schools . . . And the China Daily reported that starting salaries for new graduates surveyed by the government had fallen from $375 per month in 2002 to under $200 per month in 2005 . . . There must be real questions, therefore, about whether future constraints on the available talent in China will hold back the dragons as they try to ramp up their cost innovation strategies globally (Zeng and Williamson, 2007, p. 202).

We also argue that China is, at most, only recently emerging from the imitation stage into the incremental innovation stage. Even successful companies like Baidu, the Chinese internet search engine, have been shown to copy Western creators. The search engine’s interface is, of course, a clone of Google. Another example, Alibaba.com, a Chinese business-to-business (B2B) e-commerce company, is working towards greater creativity but its mission and vision still lacks the originality and autonomy expected in true creative acts (i.e. acts of creating something new . . . not just accepting something that is new). For example, as one of its six core shared values it has “Embrace Change” explained as “We operate in a fast-evolving industry. We ask our employees to maintain flexibility, continue to innovate and adapt to new business conditions and practice.” (www.alibaba.com/aboutalibaba/Culture_values.html – last accessed September 12, 2007). Adaptation is important. Changes are occurring rapidly in China, but “embracing change” systemically and at a country level (which is what we refer to and emphasize here as radical innovation and high value-added design change) is not the same as “driving change.” While China’s “cost innovation” strategy has elements of creativity and innovation, many of the designs and ideas on which the products and services are based are copied or modified from the West and do not use creativity or inventiveness from its students

or professionals to achieve industry or business breakthroughs or “killer apps” (Downes and Mui, 1998). An aim of this paper, is to link and frame the dimensions of business and industrial change with educational development (at all levels) in order to emphasize the urgency for driving change in Chinese businesses and educational institutions. We argue that much of the inertia of systemic higher level change stems from the traditional educational programs of China. To this extent companies like Alibaba must contend with Chinese students who are hard working, well disciplined, and knowledgeable about the facts of their studies, but often lacking in and having the opportunity to learn and experience creative drive. (Of course, as mentioned earlier, there are a number of other macro-economic and socio-political factors that have influenced the types of innovation processes in China but they are beyond the scope of this paper.) In light of our conceptual analysis linking education and innovation practices, part of the lack of creative, critical thinking may be related to Chinese engineering and business schools’ focusing on high quality fact-based educational practices to the exclusion of creative and critical thinking. According to Shimin Liu (2006, p. 7), who teaches at the University of International Business and Economics, Chaoyang District in Beijing: Chinese students still learn by rote memorization throughout primary and secondary education, despite arguments against this “force-fed” teaching method. The influence of this learning style extends all the way to university education, where poorly prepared graduates struggle to cope with unexpected challenges.

The psychological need of Chinese students to follow this pedagogical approach is evident in their desire to reproduce lecture notes precisely in exams and often sit silently in class paying reverence to the instructor and not able to question both their own actions nor the arguments being made by the teacher (Chan, 1999; Martinsons and Martinsons, 1996). Johnson (2006) hypothesized that some of this propensity towards mimetic behavior was ingrained in the Chinese educational experience via the necessary approach to learning kanji. This was exemplified in an interview with a Chinese student: Copying, at the very beginning, especially for Chinese study [is important] because for Chinese we have special characters. It is not like English where you only learn 26 letters and you have different combinations . . . For Chinese, we have [many] characters so you have to repeat a lot, copy a lot, like for one character you copy like 10 times in order to remember . . . [This] could be [done] in a different form, like for example, if you are doing math problems . . . It is not every time that the teacher gives you a new type of exercise, so it would probably be like the same type of thing with different numbers and then you practice a lot and then in the exams, it could be that same type of question repeated (Johnson, 2006, p. 262, NB. edited slightly for clarity).

The stage model offers an illustrative means of viewing the trajectory of China’s economic and technological growth. Mahmood and Rufin’s (2005) theory is congruent with our model and also further explains China’s present economic and technological trajectory. In order to continue to be profitable and growth-oriented, we argue that China’s educational system must move toward critical thinking educational practices. Even though there may be many problems associated with that stance for the Chinese

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Communist Government and teachers in general; this is necessary to continue on towards more profitable though higher risk innovations that underlie the economic growth of richer, knowledge-based economies. It can be shown analytically that radical innovation is more profitable than incremental innovation (Sheremata, 2004). If China remains in the imitation and incremental innovation stage it will not be able to further continue its economic progress; and become a major player in the knowledge economy rather than basing its economic power in labor intensive sectors. Indications of creativity in China There are emerging examples of creativity in China in the arts and architectural design. For example, Editorial Director Shaway Yeh of Modern Weekly recently stated, “The most interesting work is coming from advertising, PR, and marketing, because they have the money”. Ang Lee as a Director of Crouching Tiger, Hidden Dragon and its star Ziyi Zhang exemplify the creativeness and force of the Chinese movie industry. Artists have been creating new designs for the upcoming Beijing Olympics and architects like Ma Yansong and Qun Dang of MAD Design have been winning contracts for innovative buildings. China does show signs of changing creatively in some fields – but more sporadically than by plan or intention. Moreover, it is questionable whether some of these traditional industries are examples of radical innovation and creativity or more adulations of Western design. Sun (2000, p. 444) depicted that patenting in China can be categorized geographically with external designs (i.e. incremental innovations towards “new designs for shape, design or color of a product”) driven by industry in the South and basic science endeavors driven by government sponsorship in the more “inward looking” North. The next section discusses the need for further empirical studies within China to examine the actual pace of change and suggestions for further improvement. Suggestions for further research: examining the model in China The model described here is normative in nature and mostly prescriptive. However, it is possible to empirically apply the model to different educational institutions and businesses in China. The prescriptions from this exploratory paper suggest, the following larger questions, from which specific hypotheses can be identified: . How is the education system in China changing to meet the needs of industry? . Are Chinese business and engineering graduates creative enough to compete in the global market of critical industries that rely on technological innovation? If Liu’s (2006) arguments are predictive, the higher educational institutions in China are slowly beginning to change – but only slightly as per the recommendations stemming from the model and which we describe in the next section. Still, China continues to develop higher education facilities. For example, with 36,000 students Sun Yat-Sen Universities in Guangzhou is growing at a rate similar to that of the economy with the opening of its East campus in 2004. Its official motto is based on Zho¯ngyo¯ng: “Study extensively; Enquire accurately; Reflect carefully; Discriminate clearly; Practise earnestly” following from the Confucian canonical scripture “The Doctrine of the Mean.” The lead author had the opportunity in 2005 to visit the East campus of Sun Yat-Sen Universities and witness the massive physical growth of the facilities there. China already has over 60 million people with a college degree or higher (Chen, 2006, p. 157)

but does this vast number of graduates equate with the necessary skills of creative thinking that we argue lead to radical innovation and increased national competitiveness? A careful reading of the Zho¯ngyo¯ng philosophy would suggest not. One implication of the concepts introduced in the paper is that a thorough survey of the teaching methods and use of creativity in the classroom is in order. Some existing research programs are aimed at just such an endeavor looking at creativity in the Asian classroom (Chan and Chan, 1999; Cheung et al., 2004). As mentioned earlier, some researchers have found that a tension exists in introducing creativity into the classroom between “desirable but uncreative” (DBU) and “creative but undesirable” (CBU) behaviors of students (Kwang and Smith, 2004). They also attempted to show a difference between cultural factors and creativity emphasis by comparing Australian and Singaporean students. In general, they found Asian classroom emphasized DBU behaviors and that this increased for more experienced teachers in what appeared to be a driving out of earlier more liberal attitudes of novice teachers. We propose similar studies that utilize match pair experiments in classrooms across different cultures to explore the relationship between culture and creativity. Identifying levels of analysis Our model has multiple layers of analysis from which researchers can choose to study. We recommend that researchers select the unit of analysis appropriate to their interest, experience, and expertise for empirical investigation. Here, are suggested levels of analysis. At the individual level, the model suggests different paths of study. For example, with regard to the human development literature, a` la Piaget-type theory of learning, it is implied that students need to be nurtured in classroom environments where they grow from early stages of cognitive growth and learn first learn to mimic their mentors, then progress toward a more mature, questioning style of “the disciplined mind” (Gardner, 1999). However, the model also extends to and is influenced by (interacts with) the national level, where individual creativity is channeled into industrial inventions and process and service innovations that increase productivity and profitability. The links between the individual development and national cultural levels also has a literature with regard to the practice of innovation. The point here is that while this model is multi-level and multi-perspective (as most innovation-based theories tend to be) an empirical study can start at a specific, well-defined level of analysis, or focus on interactions between levels. We note with the latter option various confounding factors can render the conclusions of an analysis vulnerable to reliability and validity claims. We therefore recommend looking at each of the following areas specifically when approaching the implications of the model: (1) At the individual level of analysis, research would focus on the cognitively developing person regarding educational and innovation practices: . Here, descriptive and case studies might describe or characterize the creativity of individuals and how these descriptions correlate with educational background and life experiences. Anecdotal evidence and hypothesis development combined with empirical research mentioned previously suggests that there is a conflict between education practices and creativity in general in all societies. Explorations of how individuals manage creative tensions within education instructions in specific schools, colleges,

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universities in China would contribute to developing a knowledge base for investigating the creative process in educational institutions. (2) At the classroom level of analysis, research would focus on involving both student and teacher attitudes, behaviors, and roles regarding educational and innovation practices: . Here, studies could follow the practices of research by Chan and Chan (1999) and Cheung et al. (2004) mentioned earlier to identify the effects of creativity on education outcomes. Experimental designs could be implemented to test across control and experimental groups similar to Kwang and Smith (2004). Here, China, with its unevenness in regional educational progress, can provide some interesting sites for comparison by providing cases of classrooms in which CBU student behavior (identified earlier) is tolerated versus DBU (also discussed earlier) student behavior. (3) At the industry level of analysis, research would focus on the educational and innovation practices involved in technological and process/service related innovation: . Here, case studies and interview descriptions of industry and the need and use of creativity could be utilized by researchers to explore the practices being implemented by Chinese companies like Lenovo, Haier, Alibaba and Baidu. Classical cases of business from the West like 3M and Apple, which are known for creativity and value-added design, are examples of the qualitative research possible. (4) At the national level of analysis research would focus on the educational and innovation policies involved in technological and process/service related innovation: . Here, econometric data could be utilized to identify the extent to which educational practices drive economic change. Data description and analysis on creativity in the classroom would be difficult to determine but any state-wide change in policy could lead to a retrospective analysis on effects by utilizing panel data and comparing across datasets to look for changes in the effects of the policy change. As with Schumpeterian economic waves of change, linking the individual entrepreneurial activity with macro-economic changes is, however, challenging. . Also, comparisons of companies within the same industry with regard to innovations between China, other Asian countries, Europe, and the USA could also provide insights. Policy implications: national education and innovation The prescriptions of the model in this paper lead to a number of policy implications. One such implication may not bode well for the Communist party in the sense that critical thinking may provoke unrest with the status quo. This also falls in line with Mahmood and Rufin’s (2005, p. 338) theory in that we would suggest that as countries become more developed there may be a tendency towards democracy and liberal business practices with “political and economic freedom being necessary.”

On the other hand, China is already stimulating innovativeness via its Ministry of Science and Technology (MOST) of People’s Republic of China and has recently awarded grants to high quality domestic science-based organizations like the $1.5 million grant to China Sky One Medical Inc., a Chinese manufacturer, marketer and distributor of pharmaceutical, medicinal and diagnostic products (PR Newswire, 2007). The new policy “Medium-to-Long-Term Plan for the Development of Science and Technology” has the goal of becoming an “innovation-oriented” society by the year 2020 (Hutschenreiter and Zhang, 2007, p. 249). But money alone and a focus on macro-level indications of S&T factors like number of science graduates and R&D expenditures can only go so far. These do not guarantee creative action and innovation success. The changes needed for radical innovative developments require a sea change in thinking. We have argued here that in order to become more competitive in critical, value-added industries, China will need to become more innovative internally than has been the case in the recent past. However, to move in this direction, China would meet head-on the paradox existing in its traditional – and indeed current – educational policies and practices. Ultimately, the process shown in Figure 1 leads to students experiencing more freedom in a personal sense in the educational system. That is, life-long learning becomes necessary and at the same time questioning of all the dogmatic assertions of the educational establishment is necessary. (This is true in the West as much as anywhere else. In fact, it is an interesting fact that many successful examples of Harvard students have often been their drop-outs. Bill Gates is the pinnacle example of this fact, but there are many others including the now successful Mark Zuckerberg of Facebook.com fame.) As such, successful and innovative entrepreneurs will always get to the point where they do not need specific educational institutions at the personal level. This reasoning is related to the pedagogy of the oppressed (Freire, 2000, pp. 79-80), which suggested that: Liberating education consists in acts of cognition, not transferals of information. It is a learning situation in which the cognizable object intermediates the cognitive actors-teacher on the one hand and students on the other . . . Through dialogue, the teacher-of-the-students and the student-of-the-teacher cease to exist and a new term emerges: teacher-student with students-teachers. The teacher is no longer merely the-one-who-teaches, but one who is himself taught in dialogue with the students, who in turn while being taught also teach. They become jointly responsible for a process in which all grow.

A review by Kidd (2001) suggests: The students are active learners, who internalize the problems and link them to existing experiences to reflect on. Through problem-posing education students are not only taught facts and information as in banking education, they learn along with the teacher how to “think” to reflect on their lives, experiences, and the activities of others around them. They are no longer passive learners, nor are they passive in their community. They now know and are aware of their humanity, and their voice deserves to be heard.

In China, Kwang (2004) has already suggested one way out of the “the paradox of promoting creativity in the Asian classroom” is to promote an egalitarian approach to education based on self-determination theory with the fulfillment of basic psychological needs of competence, relatedness and autonomy (Deci and Ryan, 2000).

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Chinese companies can also help by hiring local talent with the explicit criterion that recruits should have creative and critical thinking skills. Both government and industry should make efforts to work with Schools of Business and of Engineering at Chinese universities to impact curriculum and perhaps co-design courses. However, this sense of praxis may not be acceptable to the Chinese Communist Government or even industry (e.g. many companies may not like employees critically questioning things, particularly in the context of Chinese business culture, etc.), leading to the perpetuation of the paradoxes examined in this paper. In this case, the paradox becomes a potential paralyzing dilemma for the Chinese Government: in order to continue growing “up the value chain” educational practices must be revolutionized but in revolutionizing the education system towards critical thinking and creativity, the very stability of the communist government may be negatively affected. Using the terms from Freire (2000), the oppressors may be freed by the oppressed through “liberating education” or in our model where critical thinking is applied in the third stage of innovation. Unless, this process of education and innovation is allowed to grow, however, the stellar economic growth of late will eventually cease when global capital eventually moves on to cheaper locations in the world (for example, to India or Malaysia). Evidence suggests that China is increasing its liberalization of trade and business but it is still questionable how much power the communist government is prepared to lose in its efforts to grow economically. Our theory linking education, innovation and business activities suggests that economic development (as a country moves up the value chain towards innovative high technology and design industries) and individual autonomy are linked such that moving up the value chain also implies moving toward democratic policies. As mentioned earlier, this is in alignment with Mahmood and Rufin’s (2005) theory regarding the role of government during the development process. Thus, a major policy implication is the need to move toward more democratic rights in the People’s Republic of China. Concluding comments We neither advocate nor suggest that educational change needs to be revolutionary to be effective. The changes necessary for propositions in our model to occur may already be in motion in China. In terms of specific policies from our theory, the analysis suggests that efforts toward changing Chinese educational practices should continue. Of course, such change is not easy, as exemplified by a case example of the suicide of a Chinese University President in charge of reforming higher education in the 1990s (Sun et al., 2003). Furthermore, while Western models and theories are acceptable and useful in western business settings, transplanting such frameworks to the Chinese culture may not apply to China’s managers and entrepreneurs. While we argue that creative and critical learning are necessary skills for innovation, the process must be designed and developed for the unique Chinese environment (Liu, 2006). Care is also needed when developing new empirical studies and their measurements and scales for research into Chinese management practices (Farh et al., 2006). Simply providing Western textbooks and the perspectives of the Caucasian world will not work. In fact, as has often been observed, the West has its own problems regarding the erosion of the fact-based foundation of students who are doing poorly in the disciplines of math and

sciences – so that the opposite problem of too much creativity without critical thinking exists in America (Kao, 2007). New texts and studies are needed that utilize the knowledge developed in the West for the Eastern context. These would be written for those managing in the East, where cultural differences may negate the effectiveness of many managerial paradigms. This paper is intended to offer researchers a framework for specifying linkages between educational policy and practices leading to business innovation, with the goal of more fully developing and integrating China’s human capital and global competitiveness. Note 1. Of course, MITS’ Altair 8800 is often recognized as the first personal computer although it could do very little but flash its lights on and off and the IBM 5150 made the term a household name. References Angle, H.L. (2000), “Psychology and organizational innovation”, in van de Ven, A.H., Angle, H.L. and Poole, M.S. (Eds), Research on the Management of Innovation: The Minnesota Studies, Oxford University Press, New York, NY, pp. 135-70, originally published in 1989. Becker, J. (2000), The Chinese, The Free Press, New York, NY. Buckley, P.J., Clegg, J. and Wang, C. (2002), “The impact of inward FDI on the performance of Chinese manufacturing firms”, Journal of International Business Studies, Vol. 33 No. 4, pp. 637-55. Chan, D.W. and Chan, L-K. (1999), “Implicit theories of creativity: teachers’ perception of student characteristics in Hong Kong”, Creativity Research Journal, Vol. 12 No. 3, pp. 185-95. Chan, S. (1999), “The Chinese learner – a question of style”, Education & Training, Vol. 41 Nos 6/7, pp. 294-304. Chen, Z. (2006), “Development prospects of China’s industries”, in Jain, S.C. (Ed.), Emerging Economies and the Transformation of International Business: Brazil, Russia, India and China, Edward Elgar, Cheltenham, pp. 155-79. Cheung, P.C., Lau, S., Chan, D.W. and Wu, W.Y.H. (2004), “Creative potential of school children in Hong Kong: norms of the Wallach-Kogan creativity tests and their implications”, Creativity Research Journal, Vol. 16 No. 1, pp. 69-78. Deci, E.L. and Ryan, R.M. (2000), “The ‘what’ and ‘why’ of goal pursuits: human needs and the self-determination of behavior”, Psychological Inquiry, Vol. 11, pp. 227-68. Downes, L. and Mui, C. (1998), Unleashing the Killer App: Digital Strategies for Market Dominance, Harvard Business School Press, Boston, MA. Farh, J., Cannella, A.A. Jr and Lee, C. (2006), “Approaches to scale development in Chinese management research”, Management and Organization Review, Vol. 2 No. 3, pp. 301-18. Freire, P. (2000), Pedagogy of the Oppressed, Continuum, New York, NY, Translated by Myra Bergman Ramos, originally published in 1972. Gardner, H. (1999), The Disciplined Mind: Beyond Facts and Standardized Tests, The K-12 Education that Every Child Deserves, The Penguin Group, New York, NY. Haski, P. (Ed.) (2004), The Diary of Ma Yan, Virago Press, London. Huang, C., Amorim, C., Spinoglio, M., Gouveia, B. and Medina, A. (2004), “Organization, programme and structure: an analysis of the Chinese innovation policy framework”, R&D Management, Vol. 34 No. 4, pp. 367-87.

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Sun, H-C., Vandenberghe, R. and Creemers, B. (2003), “Dilemmas faced by a university president in educational reforms”, International Journal of Qualitative Studies in Education, Vol. 16 No. 2, pp. 233-50. Sun, Y. (2000), “Spatial distribution of patents in China”, Regional Studies, Vol. 34 No. 5, pp. 441-55. Wagel, S.R. (1980), Finance in China, Garland Publishing, New York, NY, Originally published in 1914 by North-China Daily News and Herald, Shanghai. Xie, W. and White, S. (2006), “From imitation to creation: the critical yet uncertain transition for Chinese firms”, Journal of Technology Management in China, Vol. 1 No. 3, pp. 229-42. Zeng, M. and Williamson, P. (2007), Dragon at Your Door: How Chinese Cost Innovation is Disrupting Global Competition, Harvard Business Press, Boston, MA. Zhan, W. and Renwei, H. (2003), “What will the world gain from China in twenty years?”, The China Business Review, Vol. 30 No. 2, pp. 36-9. Corresponding author William H.A. Johnson can be contacted at: [email protected]

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Forms of knowledge and operation pattern of virtual GUI platform An analysis of China Zhejiang Online Technology Market Jin Chen College of Public Administration, Zhejiang University, Hangzhou, People’s Republic of China

Aifang Guo College of Management, Zhejiang University, Hangzhou, People’s Republic of China and School of Economics and Management, Zhejiang Sci-tech University, Hangzhou, People’s Republic of China, and

Yan Mo School of Economics and Management, Zhejiang Sci-tech University, Hangzhou, People’s Republic of China Abstract Purpose – The purpose of this paper is to analyse the operation pattern of the virtual university-industry-government (GUI) platform from the perspective of knowledge. Design/methodology/approach – Following a theoretical framework, the case of the China Zhejiang Online Technology Market (ZJOTM) is analyzed, which has been viewed as a model of the national virtual GUI platform. The operation pattern and effect of ZJOTM are discussed. The material and data are collected mainly from ZJOTM web site. Findings – According to the types of knowledge interaction between university and industry, this paper recognizes the context needed for knowledge interaction between industry and university as “virtual ba”, “physical ba” and “practice ba”. The virtual GUI platform just provides a virtual ba for knowledge interaction between industry and university. However, only “virtual ba” is not sufficient, “physical ba” and “practice ba” are also needed. Therefore, the operation of virtual GUI should utilize the complementary action of physical ba and practice ba. Moreover, it is better to deploy the ba flexibly according to the knowledge and sector characteristic. Originality/value – The paper specifies the innovation knowledge rich in industry and university and the knowledge interaction context needed, that provides a favourable framework to study the operation pattern of the virtual GUI platform. The findings also have important implications for government policy makers, university and industry practice for designing and implementing knowledge-base innovation strategies. Keywords Knowledge management, Knowledge transfer, Universities, China Paper type Research paper Journal of Technology Management in China Vol. 3 No. 1, 2008 pp. 82-93 q Emerald Group Publishing Limited 1746-8779 DOI 10.1108/17468770810851511

The authors would like to express their thanks to two anonymous reviewers for their valuable suggestions and Dr Lucy Lu, the Editor. They also acknowledge the support of the National Science Foundation of China (No. 70672048; 70601025) and the Philosophy and Social Science Foundation of Zhejiang Province, China (07JDSM032).

1. Introduction The triple helix of university-industry-government (GUI) relations, proposed by Etzkowitz and Leydesdorff (1995, 1997, 2000), links between the three institutional actors: industry, university, and government. In one form or another, most countries and regions are presently trying to attain some form of triple helix. The common objective is to realize an innovative environment (Etzkowitz and Leydesdorff, 2000). These arrangements are often encouraged, but not controlled by government, whether through new “rules of the game” direct or indirect financial assistance, or through act or new actors to promote innovation. In addition, government can function to stimulating network development among nation states and across institutional boundaries (Leydesdorff and Etzkowitz, 1998). In order to promote innovation, the Chinese Government has taken a series of measures including the establishment of virtual GUI platform. In 2002, the first online technology market was built with the guidance of government. Nowadays, there are more than 50 online technology markets in China. The US Council on Competitiveness (1998) points that the country that encourages an infrastructure of links among firms, universities and the government therefore gains a competitive advantage through quicker information diffusion and product deployment. Whereas, to the online technology markets in China, the operation efficiency is generally low and the online technology markets represent more as an empty hull and decoration (Zhang Gang, 2005). Margues et al. (2006) argue that the performance of a system of innovation relies on the intensity and efficiency of the interactions between the chief agents involved in the generation and dissemination of knowledge at the present time. Inspired by this argument, this paper analyses the operation pattern of the virtual GUI platform from the perspective of knowledge. In the next section, this paper introduces forms of knowledge and interactive mode between industry and university in innovation. The paper analyzes the innovation knowledge rich in industry and university and the interactive context which is needed to generate and diffuse knowledge. We devote a section of the paper to analyzing the special case of the China Zhejiang Online Technology Market (ZJOTM). This paper has discussion and suggestion at the end. 2. Forms of knowledge in industry and university and the context needed for knowledge interaction 2.1 Forms of knowledge in industry and university As the triple helix model suggests, innovation is generated by the combination of relations and interrelations among university, industry, and the government (Margues et al., 2006). The government functions mainly as inductors and coordinators, rather than controllers. Therefore, the interaction between university and industry and the role of these collaborations play critical actors in fostering innovation. Faulkner and Senker (1994) conceptualizes knowledge flows across academy-industry in terms of science and technology inputs, which contain a variety of forms of codified and tacit knowledge including knowledge of particular fields, technical information, skills, and artefacts. Faulkner and Senker (1995) develop of 15 different types of knowledge utilized in innovation: (1) scientific and engineering theory; (2) properties of materials: an understanding of the properties of natural and artificial materials;

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(3) design criteria and specifications: an understanding of user requirements, the selection of concept designs, and design elaboration; (4) design concepts: an understanding of fundamental operating principles and creativity in the design process; (5) design instrumentalities: the ability to follow structural procedures (e.g. to decompose a problem into sub-problems and judgmental skills); (6) design competence: skills in all aspects of design (general and specific); (7) practical experience: previous work experience (inside or outside this firm); (8) experimental and test procedures: an understanding of accepted ways of setting up experiments and tests; (9) research instrumentalities: the utilisation of experimental techniques and equipment, and the interpretation of test and experimental results; (10) research and development competence: skills in managing and organizing research and development (both in general and specific); (11) experimental and test data; (12) new product ideas; (13) operating performance: pilots, trials, or user feedback to evaluate components, materials, or services; (14) production competence: skills in pilot production/scale-up and meeting design requirements; and (15) knowledge of knowledge: the ability to locate particular knowledge, equipment, material, specialist facilities, or services not already available (in-house or otherwise)? Following the typology Faulkner and Senker developed, Rappert et al. (1999) investigate the sources of 15 types of knowledge in three sectors. They find that universities and firms made different contribution in different sectors. Some types of knowledge mainly source from universities. Some types of knowledge mainly source from business sectors, and others from cooperation between university and industry. According to the knowledge characteristic of university and industry, as well as inspiration from the literature above, and from a work of Nonaka et al. (2000), this paper figures out the innovation knowledge shown as Figure 1. Universities are ordinary rich in the S&T development information, scientific and engineering theory, S&T frontier knowledge, experimental and test data, new product ideas, design concepts, product prototypes, patent, the experimental and test procedures, new process technology, R&D competence, research instrumentalities, design competence, design instrumentalities, know-who (university expert), knowledge of knowledge, etc. Among these, the main elements of the S&T development information, scientific and engineering theory, S&T frontier knowledge, experimental and test data, new product ideas, design concepts, product prototypes and patent are explicit and can be digitalized relatively easily and transferred to others by the use of information technology (Johannessen et al., 2001). However, the technical, procedural, and cognitive knowledge such as the experimental and test procedures, new process technology, R&D competence,

University

Zhejiang Online Technology Market

Industry

Explicit knowledge Exchange explicit knowledge S&T development information scientific and engineering theory; S&T frontier knowledge; Experimental and test data

Tacit Knowledge

New product Ideas; Design concepts Product prototypes; Patent Experimental and test procedures; New process technology R&D competence: Research instrumentalities Design competence Design instrumentalities Know-who (university expert) Knowledge of knowledge;

Industry development information; technical problems information; Experimental and test data

Externalize

Mutual understanding and trust through shared experiences

Experimental and test procedures New product Ideas; Design concepts Design criteria and specifications Research instrumentalities R&D competence Design competence Design instrumentalities Production competence Operating performance Practical experience Knowledge of knowledge

85 Ba

research instrumentalities, design competence, design instrumentalities, know-who, knowledge of knowledge are mainly tacit and difficult to express and communicate to other people by means of symbols (Spender, 1993). On the other hand, industries enrich in the industry development information, technical problems information, experimental and test data, experimental and test procedures, new product ideas, design concepts, design criteria and specifications, research instrumentalities, R&D competence, design competence, design instrumentalities, production competence, operating performance, practical experience, knowledge of knowledge, etc. Among these, most of the industry development information, technical problems information, experimental and test data, experimental and test procedures, new product ideas, design concepts, design criteria and specifications are mainly explicit knowledge, while the research instrumentalities, R&D competence, design competence, design instrumentalities, production competence, operating performance, practical experience, knowledge of knowledge are mainly tacit knowledge. It is easy to identify, both university and industry own their special innovation knowledge and most of the innovation knowledge owned by them are tacit knowledge. 2.2 Context needed for knowledge interaction between industry and university In general, the industrial researchers need new knowledge in order to improve their products or processes or to develop new ones. In turn, universities need the industry’s knowledge of the market to catch up with more advanced, applicable and successful technology development (Wu and Zheng, 2005). The model of “two-way” interaction is an appropriate way of describing the links between industry and university (Meyer-Krahmer and Schmoch, 1998). Many researches stress that idea generation is often stimulated by, or involves a synthesis of, inputs from outside the firm (Faulkner and Senker, 1994). Innovation further arises from the countless institutional combinations produced by networks of relations, communications and mutual exchanges (Margues et al., 2006). There are various “channels” (Cohen et al., 2002; Faulkner and Senker, 1994) or “linking mechanisms” (Meyer-Krahmer and Schmoch, 1998) that function as informational or social pathways through which information, knowledge and other

Figure 1. Innovation knowledge in university and industry

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Table I. Types of knowledge interactions and “ba” needed

resources are exchanged or co-produced across research organizations and industry. Based on a survey among R&D executives, Cohen et al. (2002) distinguish the following channels relevant to industrial innovation: patents, informal information exchange, publications and reports, public meetings and conferences, recently hired graduates, licenses, joint or cooperative research ventures, contract research, consulting, and temporary personnel exchanges. Schartinger et al. (2002) identify 16 types of “knowledge interaction” between university and industry. Table I provides a summary of these distinctions. Knowledge creation is a continuous process of dynamic interactions between tacit and explicit knowledge (Nonaka et al., 2000). Figure 1 also shows the process of knowledge creation through dynamic interaction between industry and university. Nonaka et al. (2000) indicate that knowledge needs a context to be created, and name it as “ba”. According to Nonaka et al. (2000), “ba” can be thought of as a space shared by

Schartinger et al. (2002)

Cohen et al. (2002)

Conferences or other events with firm and university participation New firm formation by university members Joint publications Informal meetings, talks, communications Employment of graduates by firms Joint supervision of PhD and masters theses Training of firm members Mobility of researchers between universities and firms Sabbatical periods for university members Lectures at universities, held by firm members Collaborative research, joint research programmes Contract research and consulting Use of university facilities by firms Licensing of university patents by firms Purchase of prototypes developed at universities Reading of publications, patents, etc.

Public meetings and conferences

Informal information exchange Hired graduates Temporary personnel exchanges

Joint or cooperative research ventures Contract research, consulting Licenses

Publications and reports

Forms of knowledge transfered

“Ba” supported by the government

Tacit/explicit

Physical ba/virtual ba

Tacit

(Practice ba)

Tacit Tacit

(Practice ba) Physical ba/virtual ba

Tacit

Physical/virtual ba

Tacit/explicit

(Practice/physical ba)

Tacit/explicit Tacit

(Practice/physical ba) (Physical ba)/virtual ba

Tacit

(Practice/physical ba)

Tacit/explicit

(Practice/physical ba)

Tacit

Practice ba/virtual ba

Tacit/explicit

(Practice ba)

Tacit/explicit

(practice/physical ba)

Explicit

Physical/virtual ba

Explicit

Physical/virtual ba

Explicit

Physical/virtual ba

Note: ( )“ba” provided mainly by university and industry themselves

those who interact with each other. In knowledge interaction between university and industry, this context can be virtual ba, physical ba, and practice ba. 2.2.1 Virtual ba. Sharing of explicit knowledge involves relatively straightforward processes of capturing that knowledge in recordable form, packaging it, and then transferring it to the target organization through traditional modes of communication and teaching (Carayannis, 2000). Antonelli et al. (2000) argue that the internet is a critical medium for linking the development of information and new knowledge with its application. The web-based information technology, through such things as online networks, groupware, documentation and databases, offers a virtual collaborative environment for the creation of knowledge and this paper defines it as “virtual ba.” “Virtual ba” will be high efficient to exchange explicit knowledge between industry and university if the interactive side trust each other. 2.2.2 Physical ba and practice ba. Unlike money and land, transferred knowledge is held both by the donor and the recipient. Hence, knowledge is not transferred in a formal sense but is shared. Knowledge sharing may lead to a zero-sum game if one party misappropriates the explicit knowledge of another firm for its own purposes (Carayannis, 2000). Therefore, the effect of the virtual ba would be restricted by the mutual relationship between industry and university. Since, tacit knowledge is difficult to formalize and often time- and space-specific, virtual ba would be in low efficient to exchange tacit knowledge. Studt (1999) finds that the maximum use of the internet is finding technical information and new product information. Tacit knowledge can be acquired only through shared experience, such as spending time together or living in the same environment (Nonaka et al., 2000). Fleck (1996) contends that tacit knowledge is transmitted by apprenticeship and training through watching and doing forms of learning. Carayannis (2000) contends that the organizations must cooperate to create mutually reinforcing processes of learning-by-doing and learning-by-learning, where the individual members of each organization participate in a shared social setting to develop and absorb knowledge in a common context. Therefore, it is necessary to provide the physical ba (a physical context for spending time together, e.g. office, dispersed business space, meeting rooms, and exposition) and the practice ba (a shared group setting mostly connected by tasks, e.g. R&D group, workgroup, hybrid organization, etc.) to facilitate tacit knowledge interaction and transfer between industry and university. According to the triple helix theory, triple helix model is generating a knowledge infrastructure in terms of overlapping institutional spheres, with each taking the role of the other and with hybrid organizations emerging at the interfaces (Etzkowitz and Leydesdorff, 2000). Here, the knowledge infrastructure just provides a “ba” for knowledge interaction. Most of the knowledge interaction ba should be set up by mutual efforts with industry and university. The government may also support/provide the ba to facilitate the innovation knowledge interaction between industry and university (Figure 2). Table I lists all types of ba supported/provided by government for knowledge interaction between industry and university. In order to promote the knowledge interaction and creation between university and industry, the government should provide the virtual ba, physical ba and practice ba. What’s more, the virtual ba, physical ba and practice ba should not be considered alternatives or opposite solutions, but complementary solutions with strong mutual synergy.

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U–I interaction ba suppoted by government

Government

88

University

Figure 2. The knowledge interaction ba between university and industry

Industry

U–I interaction ba builted by themselves

There are important sector-specific characterizations on the main benefits of academy linkages (Rappert et al., 1999; Faulkner and Senker, 1994). Therefore, university and industry should use a variety of channels for knowledge interaction. The use of different channels represents varying strategies to ensure research efficiency, allowing to access different types of scientific and technological knowledge. Therefore, the government should consider the sector character when establishing the ba. 3. Methods and data Based on the existing literature, this paper analyzes the knowledge rich in industry and university, respectively, the knowledge interactive mode and corresponding interactive context qualitatively, which provides a theoretical framework for analysis the operation pattern of virtual GUI platform. Following this theoretical framework, this paper analyzes the case of the ZJOTM, which has been viewed as a model for the national virtual GUI platform. The operation pattern and effect of ZJOTM are discussed. The material and data about ZJOTM is collected mainly from the web site (www.51jishu.com). In addition, this paper uses the comparative analysis method. We select the online innovation virtual network of American Innocentive Technology Trade E-business Company (Innocentive) as contrast. The material about Innocentive is mainly from its web site (www.innocentive.com). 4. Case study: Zhejiang Online Technology Market (ZJOTM) 4.1 Introduction to ZJOTM The ZJOTM, the first online technology market in the country, has been established on June, 2002, providing a virtual platform for knowledge exchanges among universities, research institutes and industries and bringing into play the enthusiasm of various institutions active in science and technology innovation. It is conducted together by the Zhejiang Provincial Government, the Ministry of Science and Technology and the State

Intellectual Property. The aim of ZJOTM is to promote the business technological problem bids activity implemented validly, lead the university and the research institutes’ research activity toward firms and make the business technology need linked tightly with the technology supply from the university and research institutes by integration of science and technology resources and the conduct of science and technology policy. Zhejiang Science and Technology Department and the local governments of the provinces are responsible for the ZJOTM foundation work such as program, construction, management, organization, and coordination. The web site financially supported by the local governments is free to any internet users. The platform of ZJOTM is a distributed system, which is consisted of 11 city-class markets (called ZJOTM – XX market), 90 county-class markets and high-tech development zones (called ZJOTM – XX county/area sub-market) in the provinces. It is built up based on the standing technology markets. By internet, it links firms, universities, research institutions, risk investment organizations and technology agencies, etc. together, which forms a strong market organization network system and information technology network system covering the whole provinces. 4.2 “Ba” the ZJOTM offered 4.2.1 Virtual “ba”. The ZJOTM owns an independence web site which provides strong function including information release, information search and browse, peer-to-peer (P2P) talk, multi-media network meeting and consultation function. Members may release kinds of information include technological problem information, technology supply information, science and technology result information, talented person need information, firms information, universities and research institutes information, experts information, agency service information, innovation carriers information, etc. on the web site. Members can search and browse the released information and digital literature resources such as periodical, patent, standard and firm record, etc. Members can also show their products and carry on online Q&A consultation activity by the system’s P2P talk function. As mentioned in Section 2 of this paper, the web site provides a virtual ba for innovation knowledge interaction between university and industry, which utilizes the internet’s advantage with broad information, free from the time-space restriction and low cost. Up to April 10 in 2007, there are 81,782 firms, 34,128 university branch organizations, 10,033 agencies and 54,707 experts registered on the web site. A total of 15,522 items of technological problems and 11,886 items of patent information have been released on the web site. The click number of the web site is over 61 million. The web site has also gained the foreign research institutions attention. Up to April 10 in 2007, there are 226 firm members, 34 agencies registered on its English edition web site. This form of virtual ba provides a context for the following types of knowledge interaction between university and industry: conferences of other events with firm and university participation; reading of publications, patents, etc.; purchase of prototypes developed at universities, etc. as noted in Table I. 4.2.2 Physical “ba”. The ZJOTM is built up based on the standing technology markets. The standing technology markets and various visible technological organizations become “spot” or ”node” of the ZJOTM. These organizations under government’s supervision provide a physical ba for innovation knowledge interaction between industry and university.

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From 2002, every year the Zhejiang Provincial Government together with the Ministry of Science and Technology, the State Intellectual Property, the Chinese Academy of Sciences and the Chinese Academy of Engineering hold “China Zhejiang Online Technology Market Week and Hangzhou Technology Cooperation Week” which is aiming at “Cooperation, Innovation, Joint Effort and Shared Benefit.” Meantime, a series of activities would be arranged, such as: “China Zhejiang Online Technology Market and High-tech Breakthrough Expo,” “Symposia of Marriage between National 863 Program Breakthrough and Private, Companies,” “Handshake between specialists and entrepreneur of small and medium firms,” etc. These also provide a physical ba for knowledge interaction between industry and university. All these arrangements provide a space for the following types of knowledge interaction between university and industry: conferences or other events with firm and university participation; informal meetings, talks, communications; purchase of prototypes develops at universities, etc. as noted in Table I. The physical ba mentioned above further compensate the virtual ba’s deficiency. 4.2.3 Practice “ba”. For further facilitating the tacit knowledge exchange, science and technology innovation carrier, a kind of hybrid organization is built up, which provides a practice ba for tacit knowledge interaction between university and industry. Though the ba is conducted by the government, universities and firms are actual undertakers. The government provides necessary financial and policy support for fulfillment. Up to November 2003, the ZJOTM has set up 65 innovative carriers. This form of practice ba provides a context for the following types of knowledge interaction between university and industry: new firm formation, mobility of researchers between universities and firms, joint publications, collaborative research and joint research programmes, as noted in Table I. Both firms and universities have no obligation for these services. Therefore, almost all of the firms are willing to join the practice ba. Universities are also willing to send their students for advanced training, and commercialized their research findings too. 4.3 The operation efficiency of the ZJOTM Comparing to the other virtual GUI platform in China, the ZJOTM is fairly efficient, for it not only provides of a virtual knowledge interactive space for explicit knowledge interaction between industry and university, but also takes some measures on construction of the physical and practice interactive space for tacit knowledge interaction between industry and university. However, when comparing to the web-based community of InnoCentive, its effect is not prominent. According to the inadequacy statistics, the contract count signed between firms and universities is less than 15 percent of the count of technological problems and technological results released on the web site. The register members of the ZJOTM are mostly from local. However, the InnoCentive has over 80,000 scientists (with the Chinese are 30,000) from 175 countries registered on the web site (up to January, 2005), and has achieved broad acknowledgement by the scientists all over the world. Moreover, the process that creates new science by applying existing knowledge to illuminate what Brown (1998) calls “the unexplored white spaces between disciplines” is not significant. There are many reasons that cause ZJOTM’s lower efficiency. The low firms’ innovation capacity, high-trade cost and risk are responsible for the lower efficiency of the ZJOTM. In addition, the operation pattern also results in the ZJOTM’s lower efficiency.

First, the ZJOTM does not make full use of the advantage about the virtual ba. Though there are technological problem information, technology supply information, science and technology result information, talented person need information, firms information, universities and research institutes information, experts information, etc. on the web site, these information do not release completely and in details, which in turn limit the explicit knowledge exchange between industry and university. Second, the physical and practice ba are not provided adequately, which effects the tacit knowledge interaction between university and industry. Though there is annual “China Zhejiang Online Technology Market Week” it is not adequate and such activity should be held much often to provide the physical ba. Science and technology innovation carrier or other university- industry alliance organization should also be reinforced to provide the practice ba. Third, the ZJOTM does not consider the sector difference. As mentioned in Part 2, there are important sector-specific characterizations on the main benefits of university and industry linkages. The identical service could not satisfy all sectors requirements. 5. Discussion and suggestions This paper has identified both explicit and tacit forms of innovation knowledge rich in industry and university, respectively. We argue that knowledge interaction between university and industry is important for knowledge creation and innovation. According to the types of knowledge interaction between university and industry, this paper recognizes the context needed for knowledge interaction between industry and university as virtual ba, physical ba and practice ba. This paper argues that the knowledge infrastructure generated by the triple helix model of GUI just provides a “ba” for knowledge interaction. The virtual GUI platform provides a “virtual ba” for knowledge interaction between industry and university. However, only virtual ba is not sufficient, physical ba and practice ba are also needed. Therefore, the operation of virtual GUI should utilize the complementary action of physical ba and practice ba. Moreover, it is better to adopt channels considering the knowledge and sector characteristic. The findings have important implications for government policy makers, university and industry practice for designing and implementing knowledge-base innovation strategies. In order to promote knowledge creation and innovation, the government should build/provide all kinds of context for knowledge interaction between industry and university, including virtual ba, physical ba and practice ba, and deploy the ba flexibly according to the knowledge and sector characteristic. For most of the knowledge owned by university and industry are tacit, university and industry should effectively and efficiently use the function of physical and practice ba, rather than only the virtual when designing and implementing knowledge-base innovation strategies. References Antonelli, C. and Geuna, A. et al., (2000), “Information and communication technologies and the production, distribution and use of knowledge”, International Journal of Technology Management, Vol. 20, pp. 72-94. Brown, J.S. (1998), “Seeing differently: a role for pioneering research”, Research-Technology Management, May/June, pp. 24-33. Cohen, W.M. and Nelson, R.R. et al., (2002), “Links and impacts: the influence of public research on industrial R&D”, Management Science, Vol. 48 No. 1, pp. 1-23.

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Carayannis, E.G. (2000), “Leveraging knowledge, learning, and innovation in forming strategic government – university – industry (GUI) R&D partnerships in the US, Germany, and France”, Technovation, No. 20, pp. 477-88. Etzkowitz, H. and Leydesdorff, L. (1995), “The triple helix of university- industry- government relations: a laboratory for knowledge based economic development”, EASST Review, Vol. 14 No. 1, pp. 11-19. Etzkowitz, H. and Leydesdorff, L. (Eds) (1997), Universities and the Global Knowledge Economy: A Triple Helix of University–Industry–Government Relations, Cassell Academic, London. Etzkowitz, H. and Leydesdorff, L. (2000), “The dynamics of innovation: from National Systems and ‘Mode 2’ to a triple helix of university-industry-government relations”, Research Policy, Vol. 29 No. 2, pp. 109-23. Faulkner, W. and Senker, J. (1994), “Making sense of diversity: public -private sector research linkage in three technologies”, Research policy, Vol. 23 No. 6, pp. 673-95. Faulkner, W. and Senker, J. (1995), Knowledge Frontiers, Oxford University Press, Oxford. Fleck, J. (1996), “Informal information flow and the nature of expertise in financial services”, International Journal of Technology Management, Vol. 11 Nos 1/2, pp. 104-28. Johannessen, J.A. and Olaisen, J. et al., (2001), “Mismanagement of tacit knowledge: the importance of tacit knowledge, the danger of information technology, and what to do about it”, International Journal of Information Management, Vol. 21 No. 1, pp. 3-20. Leydesdorff, L. and Etzkowitz, H. (1998), “The triple helix as a model for innovation studies (conference report)”, Science & Public Policy, Vol. 25 No. 3, pp. 195-203. Margues, J.P.C., Caraca, J.M.G. and Diz, H. (2006), “How can university–industry–government interactions change the innovation scenario in Portugal? The case of the University of Coimbra”, Technovation, Vol. 26, pp. 534-42. Meyer-Krahmer, F. and Schmoch, U. (1998), “Science-based technologies: university-industry interactions in four fields”, Research Policy, Vol. 27 No. 8, pp. 835-51. Nonaka, I. and Toyama, R. et al., (2000), “SECI, ba and leadership: a unified model of dynamic knowledge creation”, Long Range Planning, Vol. 1, pp. 5-34. Rappert, B. and Webster, A. et al., (1999), “Making sense of diversity and reluctance: academic-industrial relations and intellectual property”, Research Policy, Vol. 28 No. 8, pp. 873-90. Schartinge, R., Rammer, C., Fischer, M.M. and Frohlich, J. (2002), “Knowledge interactions between universities and industry in Austria; sectoral patterns and determinants”, Research Policy, Vol. 31, pp. 303-28. Spender (1993), “Competitive advantage from tacit knowledge? Unpacking the concept and its strategic implications”, Academy of Management Best Papers Proceedings, pp. 17-41. Studt, T. (1999), “Internet user survey reveals increased web usage”, Research & Development, Vol. 41 No. 12, pp. 28-31. US Council on Competitiveness (1998), “Going global: the new shape of American innovation”, September, available at: www.compete.org/pdf/goingglobal.pdf Wu, X. and Zheng, S. (2005), “Science, industrial technology and economic development: empirical study of china 1992-2002”, paper presented at Portland International Conference on Management of Engineering and Technology, PICMET. Zhang Gang, X.Y. (2005), “Development pattern, operation and management of online technology market: a case study on china zhejiang online technology market”, Journal of Ningbo University (Natural Science and Engineering Edition), No. 3, pp. 352-6 (in Chinese).

About the authors Jin Chen is a Full Professor at the College of Public Administration, Zhejiang University. He received his PhD from Zhejiang University and was a Visiting Scholar at Sloan School of Management, MIT as well as visiting fellow at SPRU, University of Sussex, UK. His main research areas are managing technological innovation and R&D management. He has published four books on management of technology and innovation and various papers which appeared in IEEE transactions on Engineering Management amongst others. He is also a Guest Editor for International Journal of Manpower. Aifang Guo is a PhD student at the School of Management, Zhejiang University, China. She is an Associate Professor at the School of Economics and Management, Zhejiang Sci-tech University, China. Her research interests include knowledge management, innovation management and innovation policy. Aifang Guo is the corresponding author and can be contacted at: [email protected] Yan Mo is a Full Professor at the School of Economics and Management, Zhejiang Sci-tech University. Her current research interests are in the areas of knowledge and innovation network management.

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Multimedia University’s experience in fostering and supporting undergraduate student technopreneurship programs in a triple helix model Teh Pei-Lee and Yong Chen-Chen Faculty of Management, Multimedia University, Cyberjaya, Malaysia Abstract Purpose – The purpose of this paper is to examine the first three dimensions of the triple helix model. The focus of this paper is to study and develop a model for the role and functions performed by a university to nurture undergraduate student technopreneur development. Design/methodology/approach – This study provides a comprehensive understanding of the process of the technopreneurship program undertaken by Multimedia University (MMU) in 1999-2005. The analysis is based on the self-administered questionnaires, qualitative interviews, internal documents, web sites and direct observation. Electronic questionnaires are e-mailed to 24 founders of start-ups to explore their views on the entrepreneurial support structures in MMU. Findings – The success of MMU in undertaking the technopreneurship programs is the result of the organization structure, management’s policies and priorities which are concentrated on creating and sustaining the necessary support structures to foster undergraduate student entrepreneurial activities. Practical implications – A very interesting and useful information and impartial for new university planning to establish a culture of new enterprise creation within a university. It should be noted that though this is a study of various aspects of the success of MMU in undertaking technopreneurship programs, however, this will have an implication of how triple helix strategic model can be implemented in China. Originality/value – Many universities have focused more on linkages of entrepreneurship and commercial-valued research involving academic staff and postgraduate students rather than undergraduate student entrepreneurship. It is believed that MMU is one of the few entrepreneurial universities which focuses on undergraduate students, who, from enrollment to graduation, are offered constant encouragement, training and support for their efforts to conceive and start up business enterprises. This paper is intended to share the experiences of MMU in fostering and supporting undergraduate student technopreneurship programs in a triple helix model. This paper is intended to share the experiences of MMU in fostering and supporting undergraduate student technopreneurship programs in a triple helix model with readers in China and out of China who have interest on the effective implementation of the university - government - industry strategic partnership. Keywords Education, Entrepreneurialism, Universities, China Paper type Case study

Journal of Technology Management in China Vol. 3 No. 1, 2008 pp. 94-108 q Emerald Group Publishing Limited 1746-8779 DOI 10.1108/17468770810851520

This paper was presented at the 6th International Triple Helix Conference on University, Industry and Government Linkages, Singapore, May 16-19, 2007. Research for this paper has been supported by the CCTD at Multimedia University. The authors wish to acknowledge the contributions of the anonymous reviewers of this paper, whose suggestions helped to improve it significantly.

1. Introduction Stanford and MIT are oft-quoted examples of entrepreneurial universities whose faculty and students generate lots of innovations and enterprises that significantly impact on industry and the economy, not only of the USA but also, in many cases, even that of the world. There is much to learn from Stanford and MIT’s models, but each university operates under different local environments which will not permit exact replication of programs and missions of universities in other countries. According to Etzkowitz (2004), the universities are undergoing a “second academic revolution,” incorporating economic and social development as part of their academic mission. The first academic revolution transformed the academic structure and function of university from teaching-based university to research-based university (Etzkowitz, 2004). Over the two decades (1987-2006), many researchers have presented their own definition of entrepreneurial university. In the late 1980s, Doutriaux (1987) classified the academic entrepreneurship as one which involves the creation of new business ventures by university professors, technicians, or students through the university’s innovation centers and business offices. In the 1990s, Subotzky (1999) suggested that entrepreneurial university is distinguished by closer university-business affiliations, by larger faculty responsibility for getting external funding, and by a managerial ethos in institutional governance, leadership and planning. In the 2000s, Jacob et al. (2003) defined entrepreneurial university as a university that has built a complete internal system for the commercialization and commoditization of its knowledge such as education courses, patents, licensing and faculty or student owned start-ups. This system comprises structures such as technology transfer offices, incentives as well as allocation of research budgets to cater for the demand in both private and public sectors. Etzkowitz (2003) acknowledged that an entrepreneurial university is a natural incubator which offers support structures for faculty members and students to initiate new ventures: intellectual, commercial and conjoint. This university model trains individual students and sends them out into the world. Kirby (2006) stated that an entrepreneurial university requires a culture of enterprise that supports academics and students to commercialize their intellectual property and invention as well as spin out new and knowledge-based enterprises. In this paper, the definition of entrepreneurial university follows the classification by Etzkowitz (2003) together with Kirby (2006) except for our dominant focus on undergraduate students rather than faculty and postgraduate students. In Asia, the technopreneurship programs are mainly supported by government agencies and publicly funded institutions. Nowadays, many universities have focused more on linkages of entrepreneurship and commercial-valued research involving academic staff and postgraduate students rather than undergraduate student entrepreneurship. It is believed that Multimedia University (MMU) is one of the few entrepreneurial universities which focuses on undergraduate students, who, from enrollment to graduation, are offered constant encouragement, training and support for their efforts to conceive and start up business enterprises. These students have no working experience and are not fully supported by the government. Therefore, this paper analyzes the university-push approach as an exemplar of the entrepreneurial university model that forms the backbone for the development of technopreneurship in the undergraduate program in MMU. A triple helix model of universityindustry-government (U-I-G) relations is adopted in this study as it transcends the

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other institutional relationships. Although the paper is not directly linked to the context of China, the research findings which are based on the development of the entrepreneur spirits of undergraduates within the MMU will have strategic implications on the current reform of China higher education and the university enterprising strategies in China. This paper is structured as follows: in the next section, the triple helix model is reviewed as conceptual framework will be articulated. The next section provides a comprehensive understanding of the process of the technopreneurship program undertaken by MMU during the period 1999-2005. Finally, the results are discussed followed by conclusion and implications of management’s policies and priorities which are concentrated on creating and sustaining the necessary support structures to foster undergraduate student entrepreneurial activities. 2. Theoretical framework 2.1 The triple helix model According to Etzkowitz (1997), there are four main dimensions of the triple helix model. First is the internal transformation in each of the helices. Second is the influence of one helix upon another. Third is the creation of a new overlay of trilateral networks and organizations from the interaction among the three helices, and fourth is a recursive effect of these institutional helices or spheres (Etzkowitz, 1997, p. 142). The triple helix has a static characteristic where three spheres are independent and overlap each other while each of them has an internal core and external field space. Interaction among U-I-G is the foundation of the creation and/or development of private, public or social incubator activities, interdisciplinary research centers and venture capital (Etzkowitz and Zhou, 2006). The U-I-G interaction in knowledge-based societies is shown in Figure 1. Each helix may relate to the other to develop an overlay of communication, networks, and organizations among themselves. This paper examines the first three dimensions of the triple helix model. The focus of this paper is to study and develop a model for the role and functions performed by a university to nurture business ventures in technopreneur development (TD). The government and industry dynamics have also affected the university, in other words, there is influence of one helix upon another. The involvement of university, industry and government in the process of TD therefore results in a creation of a new overlay of trilateral networks and organizations from the interaction among the three helices.

University

Government

Figure 1. Triple helix model

Industry

3. Model and methodology This paper analyzes the university-push approach as an exemplar of the entrepreneurial university. According to Cano (2006), there are three formal factors (i.e. organization and governance structure, supported measures to create new business and entrepreneurship education) and three informal factors (i.e. attitudes of university community, entrepreneurship teaching methodologies, role models and academic reward system) that influence the formation and development of an entrepreneurial university. Figure 2 shows the conceptual framework of an MMU model which is in a few aspects different from Cano’s model (Cano, 2006). In our study, the university will be the main driver for the success of the technopreneur program undertaken by MMU. The model consists of formal factors and informal factors. However, this study mainly focuses on the formal factors as our purpose is to highlight the undergraduate entrepreneurial activities in MMU, and to discuss the implications of MMU management policies and formal university programs in fostering such efforts. The study is based on the questionnaires, qualitative interviews, internal documents, web sites and direct observation. Sources of information are internal

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Formal Factors Organization Structure - Management and Policies

Support Structures

Entrepreneurship Education

- CCTD (e.g.MMU) * Funding * Facilities * Intellectual Property Protection * Networking * Training & Seminars

- Courses - Learning Methods - Business Plan Services

Entrepreneurship Activities - Entrepreneurial Environment - Student Clubs - Competitions - Exhibitions - Industrial visits

Entrepreneurial University

Mindset of Staff

Mindset of Students

Influence of Role Models

Informal Factors

Attraction of Reward System

Figure 2. Conceptual framework for the model of entrepreneurial university

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reports provided by MMU’s (1999, 2005) Centre for Commercialisation and Technopreneurship Development (CCTD, 1999, 2005), MMU’s annual reports, university web sites and start-ups’ web sites. To collect first-hand data, visits have been carried out to the office of CCTD, start-up incubators and entrepreneurial events organized by students. The undergraduate students who have taken the curriculum subject “Introduction to Cyberpreneurship” during the second trimester of 2006/2007 are interviewed to identify the learning outcomes of the university’s entrepreneurship education. Using purposive sampling, electronic self-administered questionnaires are emailed to 24 founders of the undergraduate start-ups to explore their views on entrepreneurial support structures in MMU and the students’ experience. 4. A case study of Multimedia University, Malaysia 4.1 The process of the technopreneurship program undertaken by MMU in 1999-2005 4.1.1 Technopreneur development. The CCTD was established in 1999, very early in the development of MMU (CCTD, 2006). This is the extent to which the MMU management enthusiastically promotes the TD in MMU. CCTD comprises three units, namely, TD, commercialisation and legal services which aim to foster the culture of enterprise and facilitate commercialisation of research and innovations among MMU staff, alumni and students (CCTD, 2006). The MMU’s pre-start-up and start-up programs are parked under the TD program, which promotes and facilitates the creation of new enterprises by staff and undergraduate students. A key input to enhance entrepreneurial activities is for MMU to provide more funding for pre-start-ups and start-ups. Funding for selected pre-start-ups is kept at relatively low amounts per project, of the order of several thousand Malaysian Ringgit, and cash grants for start-ups will be based on a case-by-case evaluation, with at maximum of few of thousands of Malaysian Ringgit (CCTD, 2006). The fund allocation is adequate as MMU is mainly targeting technology-based enterprises. In addition to this, MMU also provides incubator facilities covering office rental, telecommunication facilities rental and utilities for undergraduate students at no cost. In line with the TD program, the staff of CCTD offer regular training sessions and seminars on business topics and technology road-maps, systematic programs of mentoring on concepts and ideas for the ventures, legal advice on business and intellectual property, provision of online information and literature search and assistance to source for external funding from venture capitalists and angels, and liaising with industry to obtain market information and potential for commercialization (CCTD, 2006). On August 20, 2005, in recognition of MMU’s contribution to TD throughout the years, MMU was bestowed the inaugural “Most Progressive University Technopreneurship Initiatives, 2005” award by the Technopreneurs Association of Malaysia (TeAM), having been chosen from among all public and private universities in Malaysia (MMU, 2006). This recognizes some of the notable success stories in MMU student start-up programs. Table I shows the statistics of MMU undergraduate student start-ups from year 2001-2005. Despite the relatively short period of time to run and market their products as well as the time and resources constraints, some student start-ups have managed to achieve significant turnover for their ventures as shown in Table II. This is because the start-ups are run by the undergraduate students who are working part time on their own, and using their own resources for additional funding, time, travel, networks

and ideas. The profit and loss figures are not available as they are confidential figures, and are likely to be modest sums. An undergraduate student start-up program requires the shared understanding among different players in the TD process. This means that it is difficult to grow a student start-up program without a university having an accumulated experience and track record in this field, because there are hardly any prior examples of such institutionalized programs of support for undergraduate technopreneurial activities. There should be a kind of learning process involved not only just in creating start-ups, but also in translating business ideas into viable business ventures at this level of university education. Thus, accumulating experience with student start-up programs may result in a more productive-development process. With a cumulative of five years experience since the first start-up, MMU is able to achieve a significant increase of entrepreneurial ventures among the students. This can be explained by the encouraging increase in the number of cumulative MMU student pre-start-ups and start-ups from 6 (in 2001) to 56 (in 2005). From the survey, we find that most of the start-ups (75 percent) are mainly funded by MMU or other government agencies such as Multimedia Development Corporation (MDeC). The remaining 25 percent of the start-ups are self-funded. 75 percent of the start-ups take around one to two years to develop feasible business strategies and the number of personnel is around one to three persons per start-up. Prior business and entrepreneurial experience of MMU’s CCTD staff provides several benefits. First, such experience may aid in constructing organizational routines which facilitates the technopreneur process. Experience-based routines will aid in tasks ranging from identifying potential business idea, evaluating business risks, marketing and negotiating. This finding is supported by the case of Roommart, a MMU undergraduate student start-up offering an online portal matching of tenants, landlords, purchasers and vendors of apartments, houses, rooms and other real estate. During the second year of start-up intake in 2002, two undergraduate students from the Faculty of Management (FOM) presented their initial idea of setting up a roommate matching online portal for MMU students living in the dormitories and private apartments. They soon enrolled as one of the start-ups of CCTD. With the prior experience in the first year of start-up intake, CCTD guides the Roommart start-up in completing the market research and business plan development. CCTD also leads Roommart start-up to apply for the Cradle Investment Programme (CIP) fund provided by Malaysian Venture Capital Management Bhd (MAVCAP). They emerge to be the

Year No. of pre-start-upsa No. of start-ups Cumulative no. of start-ups and pre-start-ups No. of discontinued start-ups No. of graduated start-ups No. of active start-ups at end of period

2001

2002

2003

2004

2005

0 6 6 3 0 3

0 12 18 7 0 8

0 4 22 2 1 9

0 15 37 7 0 17

10 9 56 2 2 22

Note: aEstimated, as the pre-start-ups program was newly launched in year 2005 Source: Internal Reports of CCTD

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Table I. Statistic of MMU student pre-start-ups and start-ups from year 2001-2005

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first recipient of MAVCAP’s CIP fund with a RM35,000 grant. From the survey, we also found that almost 81 percent of the start-ups face funding difficulties, and are in need of guidance in running their business. Second, the university has accumulated a network of linkages and collaborations with government funding agencies as possible supporting platforms for the student start-ups. It is easier to source collaboration partners or funding support by utilizing existing networks. Riding on the five years’ experience on technopreneurship development since the first start-up was enrolled in year 2001, MMU has liaised constantly with government agencies, venture capital companies, investment brokers, angels and investors in Malaysia to introduce them to MMU start-ups. For example, CCTD has a close relationship with CIP which funds up to RM50,000 per project (MAVCAP CIP, 2006) for the development of prototype, proof of concept or business plan. For games and animation technological business ideas, CCTD facilitates students to apply for MDeC creative multimedia cluster IP creators series grant (RM50,000 per project) (Creative Multimedia Cluster, 2006) or MDeC pre-seed fund (RM150,000 per project) (TD, 2006). In relation to the government agencies, CCTD links up with the Ministry of Science, Technology and Innovation (MOSTI)’s TechnoFund (RM500,000 – 3,000,000) (MOSTI, 2006). Among the examples of the successful working of the university-government (U-G) partnership is the case of ExSoft Solutions, a successful start-up offering management system and centralized information database for small and medium healthcare institutions. This start-up was formed in 2003, in the third year of start-up intake. With the support of CCTD, ExSoft Solutions is a successful applicant of MAVCAP’s CIP and incubate in. Net Technopreneur Development Center (NTDC) mentioned in the next paragraph. In the year 2006, they have implemented their information database system in four dental clinics and one general practitioner clinic. Third, the university management’s experience in formulating and supporting entrepreneurial activities among students is important for creating entrepreneurial environments with favourable conditions for TD. The accumulative number of start-ups increased from 22 (in 2003) to 37 (in 2004). This is due to the fact that the start-ups have been granted the opportunity to be housed in the university’s incubation center. This center provides students with rent-free office or laboratory space, information technology (IT) facilities, shared administrative support and access to relevant knowledge, network and financial resources. For instance, the NTDC commenced operations in May 2004. The NTDC is a collaboration among the MDeC, Microsoft (Malaysia) Sdn. Bhd, MMU and Hewlett-Packard (M) Sdn. Bhd (Microsoft Corporation, 2005). The centre provides. Net development related infrastructure, tools,

Company/enterprise

Table II. Financial turnover of MMU student start-ups in year 2004-2005

A B C D E Source: Internal Reports of CCTD

Turnover in 2004/2005 (annualized) RM200,000 RM24,000 RM70,000 RM300,000 RM200,000

services and facilities to promising technopreneurs. The centre is located within MMU campus together with CCTD and the start-ups. It provides technopreneurs with access to eight 64-bit servers and 17 development PCs from HP, the latest software and learning resources from Microsoft and equipment for testing of prototype software. The survey also indicates that physical infrastructures, telecommunications and other basic services play an important role in supporting their businesses. Apart from external funding and support, the university also builds up its own support system for student entrepreneurs such as facilitating the application and provision of funds for start-ups from MMU, guidance on business plans and business models, assist with intellectual property protection applications, provision of legal advice on business and IP matters, assist with sourcing technology and market information and patent searches for start-ups’ proposals for IP protection, technology roadmaps, product roadmaps, and corporate development as well as initiation of start-ups enterprises for incubating business models based on ideas and innovations from staff and students. From the survey, we find that regular training/seminars on business topics and technology development, systematic programs of monitoring on ideas for ventures, provision of online information and literature search, updating legal and intellectual property information and increased source of funding are very important in supporting the start-ups. There is a 26.7 percent increase of number of student start-ups in 2004 compared to 2003. This is due to the central role of the availability of MMU internal funds in encouraging the formation of student start-ups. Starting from 2004, the MMU technopreneur development fund (TDF) was established to award the seed money (starter-pack) to the MMU teams led by either staff, students or alumni who have marketable business ideas to build product prototypes. MMU allocates an average of RM22,500.00 per TDF project. After several years of prior experience in start-up creation, the university identifies that more could be done to grow the entrepreneurial ecosystem in MMU. Starting from the year 2005, MMU moves further to launch a pre-start-up program called as the Student Entrepreneurial Ventures Grant Scheme. The grant provides funding of up to a maximum of several thousand Malaysian Ringgit per approved undergraduate venture. Such pre-start-ups with demonstrated core competencies and ability to meet milestones would then be considered for upgrading to start-up status. In year 2005, some of the students enrolled in pre-start-up programs rather than Start-ups. This explains the decreased number of new start-ups from 15 (in 2004) to 9 (in 2005). With accumulated experience and track record of such institutionalized programs of support to undergraduate technopreneurial activities, it is projected that the number of start-ups will be increased by 15 to 20 percent each year, capitalizing on intensified efforts to incentivise the undergraduate students to initiate such entrepreneurial ventures. The larger the number of undergraduate students who start such business endeavours, the bigger the chances of having some stellar successes in some enterprises. 4.1.2 Entrepreneurship education. Entrepreneurship education has come a long way since the first ever entrepreneurship course proposed by Myles Mace at Harvard University (Katz, 2003). Recently, figures show a real boom in this type of training in the USA (Kuratko, 2005): figures cited are 2,200 courses in more than 1,600 institutions, 277 endowed positions, 44 academic reviews and more than 100 established and funded entrepreneurship centres. There are some views that it is impractical to teach a

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person to become an entrepreneur. It is not wrong to think in this way as many researchers have shown that an entrepreneur is endowed with exceptional qualities which may depend on various aspects such as personal traits and characteristics and personal life experiences. However, entrepreneurship education plays a crucial role in awakening the entrepreneurial spirit in some, and fostering entrepreneurial development in other undergraduate students and exposing them to the world of business enterprises. An entrepreneurial university can focus on teaching, by incorporating entrepreneurial training into the curriculum (Etzkowitz, 2004). An initial step in planning an entrepreneurship program is to construct a sound entrepreneurship education and curriculum. The entrepreneurship education is the basic and significant platform in providing a wealth of diverse perspectives, contacts, ideas and opportunities for undergraduate students. The distinct difference of MMU with most other universities is that it is mandatory for all MMU undergraduate students (regardless of their majors) to pursue a course on “Introduction to Cyberpreneurship.” Many people associate cyberpreneurship with entrepreneurship. Knight (1996) stated that: . . . one recent form of technical entrepreneurship is using the improvements in computer technology, especially the Internet, to conduct business, promote business or perform the process called entrepreneurship. This whole field has become known as cyberpreneurship, and varies from an organization which merely promotes itself by using an electronic brochure called a home page on the Internet, to companies and organizations which sell their products and services through the use of electronic mail on the Internet.

After the completion of the Introduction to Cyberpreneurship course, the MMU undergraduate students would be able to comprehend the concepts of cyberpreneurship and understand the basics of cyberpreneurial management, financing as well as marketing. Moreover, the students would have gained valuable training and practice to learn the business plan components and craft an effective business plan. When the cyberpreneurship subject was first introduced in year 2000, the undergraduate students have to sit for a final exam which consists of 100 multiple-choice questions besides having to write a business plan as an assignment. Starting from year 2006, the final exam has been abolished and students are required to form groups to actually start and run a business venture in the university campus for a defined period of time. In addition, they need to develop a web site to sell their products or services. The students have to come out with their own business ideas, look for business partners, pump in their own capital and market their products or services. At the end of the course, the students will report to the whole class their experience and the profit or loss made throughout the business period. The profit or loss made is divided among the team members. This transformation in the course syllabus has significantly changed the reception and attitude of students towards learning cyberpreneurship, as they are able to “dirty their hands” and reap some rewards or suffer some loss. However, it is the experience which is valuable. Apart from “Introduction to Cyberpreneurship” subject, MMU offers other related entrepreneurial subjects such as “Advanced Cyberpreneurship” and “Technopreneur Venture.” Starting from June 2007, the MMU entrepreneurship, soft skills, innovation, leadership and knowledge certification program, or better known as MMU e-SILK Certification Program is offered to the undergraduate or postgraduate students. All these modules are aimed at fostering entrepreneurship among undergraduate students.

This type of education relates to the evolution of learning processes and methods from a didactical mode towards an entrepreneurial mode, as demonstrated by Gibb (1993). Using an interview method with the undergraduate students, it is found that the students’ real life learning experience can be matched with the entrepreneurial learning mode (Table III). In this study, it is found that the greater the emphasis for entrepreneurship in the academic undergraduate environment in the university, the greater the positive impact for creating an entrepreneurial university. Secondly, the greater the number of entrepreneurs among the students in the university, the greater the positive impact for creating an entrepreneurial university. Entrepreneurial mode

Student learning activities

Mutual learning

The students do not depend on their course instructors to teach them how to run their business The students practically run a real business throughout the course. It is not a text-based course The students in each group debate the business model, the amount of capital and the role of each member The students gather feedback from their customers, other students regarding their business model The students conduct their business outside of the classroom. Some students set-up their stalls at university compound, some students approach students and staff face-to-face to promote their products and services. Some students sell via the internet In between the business period, some students do not achieve their profit target or make loss. They are under great pressure and try many ways to re-build their business in order to achieve their objectives Some groups may not have the best business ideas. They “borrow” other groups’ idea and enhance their branding through attractive packaging and creative advertisement Some groups have to take risk in introducing innovative business ideas which no one could predict its outcome. As the business progresses, they chop and change to adapt and optimize The students have to make critical decision in solving problems such as inadequate capital, poor sales, lack of manpower due to members have classes during business hours and, etc. Basically, the students experience the whole business process and they discover the entrepreneurial initiatives by themselves

Learning by doing Learning through interpersonal exchanges, debates, discussions Learning through feedback from different and numerous people Learning in a flexible, informal environment

Learning under pressure: objectives must be reached

Learning by borrowing from others

Learning through trial and error

Learning by solving problems

Learning through guided discovery

Source: Adapted version of entrepreneurial mode by Gibb (1993)

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Table III. Entrepreneurial mode of learning in MMU (Pedagogical method)

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4.1.3 Technopreneur activities. Many entrepreneurs have a passion for sharing their vision and helping others. These people also understand the importance of making connections with potential technology, funding, and marketing partners. This is best accomplished through formal and informal activities such as club events, networking dinners, competitions and exhibitions. As a part of creating an entrepreneurial environment, a student club, which actively propagates entrepreneurial thinking and behavior, will be necessary. Cyberpreneurship Club was established in MMU Melaka campus by a group of students who are keen on the development of cyberpreneurship in 1999 (Cyberpreneurship Club, 2004). The launching of this student-run club has received support by the MMU faculty of business and law, FOM and CCTD. Cyberpreneurship Club was the pioneer in organizing business plan competitions among the undergraduates in Malaysia. This annual event was firstly known as Malaysian Inter-Varsity Entrepreneur Contest (MIVEC) 2001 (MIVEC, 2003). MIVEC business plan competition comprises two forms: written competition and presentation. The business idea can be a wholly new product or service or even modification of existing product which create value and income for the business. This event aims to provide an opportunity for the Malaysian undergraduates to present their innovative ideas to the attention of business world and transform their ideas into reality. Participants in this event also have the occasion to foster closer relationships with other Malaysian universities undergraduates, Malaysian entrepreneurs, venture capitalists, government agencies and business corporation. Entrepreneur Challenge is another annual event initiated by Cyberpreneurship Club starting from year 2002. Through Entrepreneur Challenge, the Cyberpreneurship Club brings together a network of successful CEO’s, alumni, students, faculty, venture capitalists, and other key players in the venture support system. In February 2005, Cyberpreneurship Club organized an exclusive exhibition of 26 MMU undergraduate students’ start-ups companies to showcase their entrepreneurial endeavors. Following the success of Cyberpreneurship Club in Melaka campus, another student-run club known as Technopreneur Development Club (TDC) began its operation on the March 6, 2000 in the MMU Cyberjaya campus. TDC is patronized by Malaysia’s former First Lady, Tun Dr Siti Hasmah Hj Mohd Ali, the wife of Tun Dr Mahathir Mohamad (TDC, 2001). The club is entirely organized and funded independently by undergraduate students themselves, and its goal is to create technopreneurship awareness in MMU community. In 2003, TDC has been chosen by E2’s organizers to conduct promotional efforts and as working committees in MMU (TDC, 2001). E2 is known as “Excite The Entrepreneur” which is an entrepreneurship development programme seminar sponsored by the MAVCAP. MAVCAP is working with TeAM to present this seminar to universities and colleges students in Malaysia. MMU has been chosen as the strategic venue to roll out this E2 programme which is attended by the other Malaysians universities students, entrepreneurs, business corporations, venture capitalists and government agencies. Conclusion The triple helix model, in general, leads us to analyze the institutional actors in the interactive operations at the system level. The triple helix model which consists of these three helices (i.e. U-I-G) is a vital framework in which each institution moves in a

common direction to stimulate and sustain the entrepreneurship development. Each of these three helices can assume the role of the other (Etzkowitz and Leydesdorff, 2000). For instance, the university can play the role of industry, providing incubator services and business experience for the newly established start-ups companies. The government can play the role of industry, providing a regulatory environment and offering modest funding support for the potential entrepreneurs. The industry can play the role of the university in organizing training and development program and seminars for the entrepreneurs. First is the internal transformation in each of the helices. The traditional academic tasks in a university are expanded in light of a new entrepreneurial paradigm. For example, a new university incubator model for undergraduate students is deemed necessary. Malaysian public universities, due to the government regulation, are subject to more restrictions related to management and financial autonomy. Malaysian private universities like MMU have more flexible systems. The establishment of a university incubator for undergraduate students could nurture student start-ups during their undergraduate years and effectively serve as their early stage of TD. These incubator graduates create jobs for others, revitalize the university scene and strengthen local and national economies. The second is the influence of one helix upon another in bringing about the revolution. For instance, the Malaysian government bodies such as MAVCAP offers CIP, in which the Ministry of Finance has allocated RM100 million to provide funds to individual technopreneurs including undergraduate students with innovative ICT business ideas. When the government revised the rules of the distribution of funding allowing applications from the undergraduate students (in addition to faculty and postgraduate as provided for previously), the government has expanded the dimensions of entrepreneurial activities to grow more entrepreneurs in the universities. This is an important development in the U-G linkages. Thirdly, one of the ways for university to engage with industry is through technology transfer and commercialization activities (Wang and Lu, 2007). In fact, some early stage technologies such as those originating from the MMU undergraduate student start-ups require more broad-based research investment to reach better commercial viability. This could be achieved through successful technology transfers involving the interaction among the founders of the undergraduate student start-ups, government funding agencies and the industry business partners. The university knowledge transfer activities are an essential part of the work of higher education industry as they could advance the government’s economic development (Li-Hua, 2007). There are many different modes of how undergraduate student start-ups interact with the government agencies for funding support, and knowledge and technology transfer to and from industry. For example, the founders of the MMU undergraduate student start-ups are actively engaged in the resource-provider network to exchange knowledge via training and seminars organized by the university, government and the industry. As a result, this helps in creating a new overlay of trilateral networks and organizations from the interaction among the three helices. The momentum towards the emergence of an “entrepreneurial university” is exceptionally strong in MMU, despite different starting points and modes of development programs. From the analysis of the process of the technopreneurship program undertaken by MMU in 1999-2005, we conclude that MMU as a private

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university has successfully implemented the technopreneurship program for the undergraduate students who have no working or business experience. The success of MMU in undertaking the technopreneurship programs is the result of the organization structure, support structures (e.g. CCTD), planning and foresight of MMU management. From the study, we could suggest that as a new private university, it is essential to set up a center to support and facilitate the undergraduate entrepreneurship program. This Center acts as a support structure in fostering the technopreneur process. Therefore, this center must have a good network of linkages and collaboration with government funding agencies and industry as well as business partners. In addition, the center must be able to provide and maintain the organizational routines such as identifying potential business ideas, evaluating business risks, marketing and negotiations to support the program. Besides, providing such services, the center’s essential role is also to supply and maintain up-to-date IT and administrative infrastructures and services. Apart from that, the other parts of the center’s “nuts and bolts” operations are facilitating the application and provision of funds for start-ups from MMU, partnership with start-ups on business plans and business models, assist with intellectual property protection applications, provision of legal advice on business and IP matters, assist with sourcing technology and market information and patent searches for start-ups’ proposals for IP protection, technology roadmaps, product roadmaps, and corporate development. A new University with low-capital funding should emphasise on technology-based and service products instead of laboratory or hardware-based technologies such as biotechnology and health products. When one understands the underlying dynamics, it is sometimes possible to develop many successful entrepreneurs in a new university. It will be difficult for successful entrepreneurs’ stories to emerge in an institution which does not embrace change from a traditional teaching and research university to an entrepreneurial university. The university’s policy which fails to embrace change for new model that is based on interactions and linkages among the helices will miss the prospect in becoming an entrepreneurial university. In conclusion, in order to establish such a culture of new enterprise creation within a university, the management’s policies and priorities should be concentrated on creating and sustaining the necessary support structures to foster student entrepreneurial activities, such as MMU’s CCTD and the many schemes to promote and fund student efforts (e.g. Student Entrepreneurial Ventures Grant Scheme and TDF). References Cano, M.G. (2006), “A literature review on entrepreneurial universities: an institutional approach”, available at: http://selene.uab.es/dep-economia-empresa/Jornadas/Papers/2006/ Maribel.pdf (accessed March 4, 2006). CCTD (1999), internal reports, Centre for Commercialisation and Technopreneurship Development, Malaysia. CCTD (2005), internal reports, Centre for Commercialisation and Technopreneurship Development, Malaysia. CCTD (2006), available at: www.mmu.edu.my/ , cctd/ (accessed March 1, 2006). Creative Multimedia Cluster (2006), available at: http://cmc.msc.com.my (accessed March 1, 2006).

Cyberprenuership Club (2004), available at: www.angelfire.com/biz7/cpconline/CPCclub.htm (accessed March 1, 2006). Doutriaux, J. (1987), “Growth pattern of academic entrepreneurial firms”, Journal of Business Venturing, Vol. 2, pp. 285-97. Etzkowitz, H. (1997), “The entrepreneurial university and the emergence of democratic corporatism”, in Etzkowitz, H. and Leydesdoft, L. (Eds), Universities and the Global Knowledge Economy, A Triple Helix of University-Industry-Government Relations, Pinter, London, pp. 141-52. Etzkowitz, H. (2003), “Research group as ‘quasi-firms’: the invention of the entrepreneurial university”, Research Policy, Vol. 32, pp. 109-201. Etzkowitz, H. (2004), “The evolution of the entrepreneurial university”, International Journal of Technology and Globalization, Vol. 1 No. 1, pp. 64-77. Etzkowitz, H. and Leydesdorff, L. (2000), “The dynamic of innovation: from national system and ‘mode 2’ to a triple helix of university-industry-government relations”, Research Policy, Vol. 29, pp. 109-23. Etzkowitz, H. and Zhou, C. (2006), “Triple helix twins: innovation and sustainability”, Science and Public Policy, Vol. 33 No. 1, pp. 77-83. Gibb, A.A. (1993), “The enterprise culture and education: understanding enterprise education and its links with small business, entrepreneurship and wider educational goals”, International Small Business Journal, Vol. 11 No. 3, pp. 11-34. Jacob, M., Lundqvist, M. and Hellsmark, H. (2003), “Entrepreneurial transformations in the Swedish University system: the case of Chalmers University of Technology”, Research Policy, Vol. 32, pp. 1555-68. Katz, J.A. (2003), “The chronology and intellectual trajectory of American entrepreneurship education 1876-1999”, Journal of Business Venturing, Vol. 18, pp. 283-300. Kirby, D.A. (2006), “Creating entrepreneurial universities in the UK: applying entrepreneurship theory to practice”, Journal of Technology Transfer, Vol. 31, pp. 599-603. Knight, R.M. (1996), “Cyberpreneurship or entrepreneurship on the internet”, available at: http:// ausweb.scu.edu.au/aw96/business/knight/paper.htm (accessed March 1, 2006). Kuratko, D.F. (2005), “The emergence of entrepreneurship education: development, trends and challenges”, Entrepreneurship Theory & Practice, September, pp. 577-97. Li-Hua, R. (2007), “Knowledge transfer in international educational collaboration programme, the China perspective”, Journal of Technology Management in China, Vol. 2 No. 1, pp. 87-97. MIVEC (2003), available at: www.geocities.com/cpc_online/mivec_index.htm (accessed March 1, 2006). MAVCAP CIP (2006), available at: www.cradle.com.my/cms/index.jsp (accessed March 1, 2006). Microsoft Corporation (2005), available at: www.microsoft.com/malaysia/press/linkpage4292. mspx (accessed March 1, 2006). MOSTI (2006), available at: www.mosti.gov.my/ (accessed March 1, 2006). MMU (1999), internal reports, Multimedia University, Cyberjaya. MMU (2005), internal reports, Multimedia University, Cyberjaya. MMU (2006), available at: www.mmu.edu.my (accessed March 1, 2006). Subotzky, G. (1999), “Alternatives to the entrepreneurial university: new modes of knowledge production in community service programs”, Higher Education, Vol. 38, pp. 401-40. TD (2006), available at: www.technopreneurdevelopment.net.my/cms/ (accessed March 1, 2006).

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TDC (2001), available at: http://tdc.mmu.edu.my/test/index.htm (accessed March 1, 2006). Wang, Y. and Lu, L. (2007), “Knowledge transfer through effective university-industry interactions, empirical experiences from China”, Journal of Technology Management in China, Vol. 2 No. 2, pp. 119-33. About the authors Teh Pei-Lee is currently a Lecturer at Faculty of Management, Multimedia University, 63100 Cyberjaya, Selangor Darul Ehsan, Malaysia. Her research interests cover technology management, entrepreneurship and university-industry-government linkages. Teh Pei-Lee is the corresponding author and can be contacted at: [email protected] Yong Chen-Chen is currently a Lecturer at Faculty of Management, Multimedia University, 63100 Cyberjaya, Selangor Darul Ehsan, Malaysia. She is also a Member of Centre for Borderless Markets and Economies among the Centres of Excellence of Multimedia University. Her research interest lies in the area of international economics, specifically, trade liberalization, time series and panel analyses.

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of the Emergence of the entrepreneurial Emergence entrepreneurial university university in evolution of the triple helix

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Chunyan Zhou Business School, Shenyang University, Shenyang, People’s Republic of China Abstract Purpose – The study aims at disclosing the evolution process to an entrepreneurial university in the government-pulled triple helix in China through the analysis of MIT and Stanford model of “university-pushed triple helix” in which academic institutions take the lead in regional innovation. Design/methodology/approach – The paper is based on a case study of the Northeastern University (NEU), which is located in the Northeast China where there is a dominant government-pulled triple helix and with the establishment of China’s first science park in which a highly successful software company (Neusoft) was created. Findings – The pathway to an entrepreneurial university begins with governmentpulled þ industry-university collaboration, to university-industry collaboration þ interaction triple helix. This may be followed by a gradually developing “university-industry collaboration” in which companies fund academic research with potential industrial use, the beginnings of a university-pushed triple helix. Originality/value – The analysis of NEU exemplifies the emergence of the entrepreneurial university in China and provides strategic implications for policy makers in terms of designing the appropriate policy to support university enterprising strategy. Keywords Entrepreneurialism, Universities, Innovation, China Paper type Conceptual paper

1. Introduction A university-industry-government triple helix based upon independent institutional spheres in which each can interact freely and “take the role of the other” has been identified as form of social organization that is highly conducive to innovation. It emphasizes the university’s role in knowledge-based economies and the rise of the entrepreneurial university. (Etzkowitz and Leydesdorff, 2000; Leydesdorff and Etzkowitz, 2001; Etzkowitz, 2003). A triple helix for regional innovation emphasizes government’s optimum role in development. What is the possible course of evolution for a government initiated triple helix in China? How will an entrepreneurial university of China be formed? In order to achieve “indigenous innovation,” the Chinese Government has requested universities with research capabilities to enhance the country’s level of industrial technology. Developing world-class universities and encouraging them to play a leading role in regional innovation is increasingly recognized as an effective economic- and social-development strategy in knowledge-based societies. Such a strategy requires: . a high level of society investment in universities, from industry and government; . a highly developed ability to utilize the outputs; and

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academic capabilities and initiatives that put new knowledge to use for which there is no pre-existing demand (Etzkowitz, 2006a, b).

China is still in the early stage of a triple helix development: through a government-pulled þ industry-university collaboration. One objective of this collaboration is to realize universities obligation to apply knowledge to meet industrial needs, from a relatively passive position, of taking industrial funds to carry out specific tasks requested by firms. This is different from “university-industry collaboration,” in which the research initiatives of universities come first with industrial uses as a byproduct. Understanding the evolution of the triple helix may be clarified by comparing different phases and stages of development of the model in China and the USA. The entrepreneurial university is a different concept from university entrepreneurship activity. An entrepreneurial university must have three missions: teaching, research, and service for the economy through its entrepreneurship activities at one time. Continually participating in society’s technological innovation, it has four primary characteristics that can be used as criteria of entrepreneurial university capacity: (1) Undergoing technology transfer and entrepreneurship based on high-tech development. (2) Sufficient resources of S&T research and spin-over of knowledge innovation to the located regions; as well as having strong influence on the regional industries and economy. (3) Entrepreneurship are widely accepted in ideology and supported systematically. There are considerable numbers of staff to join firm formation for “high-tech innovation” . . . And spin-offs or University-run enterprises (UREs) influence the regional industries strongly to form its leading industries. (4) There are organizational mechanisms in university-industry interface, e.g. technology-transfer office, or office of technology license, and industry-university collaboration committee. To more closely analyze the entrepreneurial academic development in China, we selected Northeastern University (NEU) as a case study since it developed the first computer (1958) and established China‘s first science park (1988-1990). With an IT advantage, but not elite status, it demonstrates that not only top research universities may have entrepreneurial aspirations. In addition to science and engineering resources, research capacity, the tradition of collaboration with industry, the NEU case suggests that universities need government policies and financial support, as well as university administration consensus and the transformation of academic assessment criteria to develop an entrepreneurial university. 2. Government-pulled triple helix In China, on one hand, neither university nor industry is strong enough to become the organizer of regional innovation. On the other hand, a strong government role in society and the state ownership relation among university, industry and government means that only government can become the regional innovation organizer (RIO).

Thus, government typically pulls the other two spheres to achieve regional innovation, forming a government-pulled triple helix with one head and two wings. 2.1 Innovation capacity of industry: USA/China Leading US industrial firms possess broad R&D resources and pay attention to training. Some of them work together with other corporations and national labs to develop and improve technology. Most of them have established own office of technology transfer, in order to track research with commercial potential in universities and national labs, and do technology business with other firms. Firms increasingly view intellectual property right (IPR) as the core of their strategy for development, and attach importance to protecting IPR. They influence government to strongly protect IPR, and maintain US enterprises’ competitive advantages all over the world. Chinese industry typically operates at a low-technology level in a labor and natural resources economy. Manufacturing is dominant in most sectors but firms are very weak in absorptive capacity and innovation ability. Enterprises are in transition from plan to market economy and to understanding and respecting IPR. They cannot yet become the main actors of high-tech innovation. The industrial innovation capacity of Northeast China is poor, with limited industrial R&D facilities ill connected to practical needs. For example, only 73 of 708 advanced technology enterprises have R&D departments. The problems of existing enterprises include: . Enterprises are good at technology improvement, but not independent R&D or indigenous innovation. There is a critical insufficiency in new technology development, especially in high-tech industries. Most of them lack their own IPRs, which keep their competitive force. . It is not well organized that imported technologies are applied to meet local needs due to the complexity of the technology importation and application process. . Enterprises lack of innovation culture is a carryover from the former planned economy. In a planned economy, it is not a great problem for an enterprise if its products are not popular in the “market,” since capital and other resources are provided by government through the plan rather than from “earnings.” Moreover, the resource-based economy fostered an expectation that as long as resources are not exhausted, the region is expected to be viable. 2.2 University ability in research and entrepreneurship The idea that basic research is an engine of technological innovation from Vannevar Bush’s Endless Frontier Report is deeply rooted in US S&T policy and culture (Bush, 1945). Since, World War II, science policy has successfully supported university basic research, with spillovers of technology invention resulting in firm-formation and creation of the “entrepreneurial university.” The US university is relatively stronger than industry and government in producing novel knowledge and forming new technology and industries. Government does not have to make money directly; therefore, there is less stress on its officials than in some other countries. Industrial innovation, which pays more attention to product development, needs basic research from the university. Breakthroughs from basic research can result in significant innovation, forming new firms and industries. This is the most important advantage of the university in technological innovation.

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As a whole, the gap between high education of China and USA is not in scale but rather in quality and level of contribution to society. In the US university system, a decentralized model of university technology transfer has evolved, with the office of technology transfer utilizing multi-methods to transfer technology. Moreover, many university-originated start-ups, as they became successful, act as angels to newly emerging firms, providing a source of seed capital (Etzkowitz and Pique, 2005). In China, technology transfer is attracting greater attention. Up to now, national centers of technology transfer have been established in six universities. Some universities have even set up international centers of technology transfer to help introduce technology from other countries. Although universities in China can enhance existing technology and assist industrial renewal through industry-university collaboration, there still are the following gaps in university innovation capability: . Knowledge spillover: the universities do not have enough research resources and results to provide knowledge for the regions where they are located. The universities in the region do not have enough capital to support their research efforts, neither the enough support from their alumnus. . Industry-university collaboration has been of limited use in resolving technology issues in firms. Most university research results are hard to be transferred to industry. The universities and research institutes insufficiently meet regional needs. Typically, they mainly serve national projects or “S&T Frontier.” Although they should meet industrial needs, but their results were not available and feasible, staying in book shelves. 2.3 The role of government in regional innovation The US Government supports innovations in university and industry through making policies, enacting laws, direct investment or indirectly encouraging (venture) investment, and purchase of high-tech products. During the 1960s, government bought 37-44 percent of all integrated circuit products, thereby accelerating the development of the industry even though the overt purpose was simple military procurement. In Silicon Valley, one-fourth of orders are from the US Government. The development of aviation, electronic computer and semiconductor industry greatly depends on government support. The policies and laws, which have powerfully stimulated high-tech industry in USA, are relatively stable, consecutive and effective, despite the absence of a coordinated industrial policy (Mowery and Rosenberg, 1998). Similarly, policies and laws play a critical, even much stronger, role in China. Since, the 1980s, China has created policies and laws to promote the development of science and technology, knowledge industrialization, and high-tech industry. However, the policies sometimes lack stability and continuity. Policies and laws in USA aim at guidance and prevention in advance, whereas in China greatly they are ex post facto used as tools to control or remedy. Every official, who has taken an important action, is typically followed by another person who has his/her new ideas to put forward in order to demonstrate achievement in the post. This leads to less-consistent policies but is a commonplace of policy and politics everywhere. Since, government plays the leading role in regional innovation, absence of foresight in policy and law exercises critical influence on the other parties to innovation.

2.4 Government-pulled triple helix model in China From 1950 to 1978, the Chinese university was influenced by the former Soviet Union and mainly engaged in teaching. Research, especially for the military, was primarily carried on by research institutes separated from university and industry. Since, the first National Conference of Science and Technology (1978) was held, particularly under the guidance of Xiaoping Deng’s “S&T is the first productivity,” the university started to engage the regional economy. The second National Science and Technology Conference (2006) indicated that industry must become the main actor for innovation and university should contribute to innovation. Industry and university institutions are predominantly influenced by government, including those in the private sectors. This is the premise to form a government-pulled triple helix model. A government-pulled triple helix has the following characteristics: . government initiates and controls significant innovation projects; . all or most research universities, key research institutes and corporations are affiliated to state; . government’s initiatives are the batons: the top leader’s thought gives direction to all of the country (party and government); and . government participates in the organization of primary innovation agents, such as high-tech development zones, science parks (incubators), Tech & IPR markets as well as innovation networks. A government-pulled triple helix has advantages and disadvantages. The advantages are that it is easier to achieve large-scale national projects reorganize regional resources and fill innovation gaps. Government authority may foster university-industry links and encourage the university’s interest in entrepreneurship. The disadvantages include: university and industry might lose flexibility; university-industry jointly innovations tend to be “shows” to the government, for personnel, equipment and funds in the two parties are from the state. Moreover, the two parties might rely excessively on government, resulting in their passivity and inertia. Finally, government capacity may be too overloaded to support university and industry for innovation. In fact, in USA there has been a co-existence of government-pulled, corporate-led and university-pushed triple helix since 1940s. Generally, university-pushed model works best for leading-edged innovation; whereas government-pulled model is the best for national strategic projects. In the USA, the Eisenhower Presidency recreated National S&T Capacity. In 1958, after Soviet Satellite launch, Eisenhower, Neil McElroy from Procter & Gamble and James R. Killian President of MIT formed the highest decision-making group for S&T affairs. Government established NASA and the Advanced Research Projects Agency to reinvigorate R&D capabilities (Hafner and Lyon, 1996). 3. Industry-university collaboration The premise of university’s cooperation with industry is needs and consensus. MIT loss of state funding led it to use an industrial solution to resolve its financial crisis (Etzkowitz, 2002). Industry also needs university’s aid. Government provides bridges and channels to enhance the collaboration. The university focuses on taking industrial

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funds and applying knowledge to resolve problems in practice with industrial enterprises the organizers and designers of these innovation activities. Universities in China have maintained a tradition of industry-university collaboration since 1950s when the People’s Republic of China was established and many “new” higher educational institutes had already been built. Institutions in industry and university as state affiliated parts generally collaborate each other for technique improvement. Usually, factories or other industrial sectors searched for university’s help to resolve their problems in technology. Although universities have an obligation to aid industries, they are in a passive position waiting on requests and funding offers. The objective of the collaboration is to meet needs from industry. So this can be called “industry-based collaboration.” Another kind of collaboration is university-industry collaboration, attaching most importance to the needs of universities in research fund and practical education. Indeed, US research universities always try to find university-industry collaboration, rather than only wait for industry-university collaborations. Both kinds of collaboration should co-exist. But the proportion of university-industry collaboration is increasing, as university’s role evolves. However, in the past decades, universities in China almost only engage the former. 4. Evolution to university-industry collaboration and interaction triple helix A government-pulled þ industry-university collaboration triple helix model is an important stage in the evolution to a triple helix innovation model in present China. To pull university and industry for innovation, Chinese government is both RIO and main investor. In such a model, government can call on university and industry to participate in innovation anytime and anywhere. It ensures the achievement of some significant national projects. Industry-university collaborations result in that the research results with commercialization potential were rarely transferred into industry to develop new industrial technologies and create new industries. It spurred NEU’s entrepreneurship. In fact, in USA there has been an interaction triple helix with the co-existence of government-pulled, corporate-led and university-pushed triple helix since 1940s. Generally, university-pushed model works best for leading-edged technological innovation; whereas government-pulled model appropriates best in national strategic projects. In the USA, the Eisenhower Presidency recreated National S&T Capacity. In 1958 after Soviet Satellite launch, Eisenhower, Neil McElroy from Procter & Gamble and James R. Killian President of MIT formed the highest decision-making group for S&T affairs. Pulled by the government, NASA and the Advanced Research Projects Agency were established to reinvigorate R&D capabilities (Hafner and Lyon, 1996). The second National Science and Technology Conference of China recognized completely the significance of technological innovation and identified indigenous innovation strategy. To develop research universities has been looked upon a measure to fulfill effective indigenous technological innovation. There have been some “university-based collaborations” under the help of the policies from some sectors such as China National Science Foundation (CNSF) and S&T Ministry. For example, CNSF prescribes that the projects to have industrial potential can obtain priority during the application. The policy has supported university-based collaboration to enhance

university’s research ability. At the same time, it also proposed industrial strength for competition. Moreover, in order to fulfill technology transfer, China’s universities on one hand engage in industry-university collaborations to improve existed industrial technologies, other hand establishing “high-tech university-run enterprises” to achieve knowledge capitalization. The tradition to serve for economy and society and state needs make university entrepreneurship feasible. The dawn of the entrepreneurial university model are emerging. There are many factors that decide the success of university entrepreneurship model, such as cultural tradition, practical base, strong needs from local industry development, and productive academic results available to be capitalized, as well as emerging excellent entrepreneurs. However, in China with government leading and organizing role, organizational mechanisms and policies in university technology transfer and entrepreneurial talents are the most important factor. In fact, technology transfer through an entrepreneurial approach is a process of new knowledge spillover and practical application. Entrepreneurial professors in universities actually are “transmission agents” for S&T information. The existence of such a group of agents is vital for a university entrepreneurial approach to be successful. As universities’ research and entrepreneurial ability enhances, university-pushed model will appear in some developed areas. And as industries’ innovation ability builds up, corporation-led model also will get more popular. As a result, the evolution points to a co-existence of industry-university and university-industry collaboration, as well as a triple helix with a mixture of government-pulled, corporate-led, and university-pushed model. The new and old model will mix as some farmers ride motors to go to crop field for work with spades. 5. Towards an entrepreneurial university: NEU in regional innovation We selected NEU as a case study of entrepreneurial academic development since it developed the first computer (1958) and established China‘s first science park (1988-1990). With an IT advantage, but not elite status, it demonstrates that not only top research universities may have entrepreneurial aspirations. In addition to science and engineering resources, research capacity, the tradition of collaboration with industry, the NEU case suggests that universities need government policies and financial support, as well as university administration consensus and the transformation of academic assessment criteria to develop an entrepreneurial university. NEU located in Shenyang city of Liaoning Province in the Northeast China (Figure 1). Its development is tightly linked to regional natural resources, leading industries and cultural bases. As a whole, Liaoning regional innovation is taking the form of government-pulled þ industry-university collaboration. However, it will undergo an evolution to a triple helix regional innovation model. 5.1 Profiles of Liaoning Province and NEU in Northeast China The economy in Northeast China is traditionally dependent on its natural resources, including land, mineral, oil, waterpower, forest, etc. Northeast crude oil reserves and output of national totals: 1/2 and 2/5; iron ore reserves – 1/4; wood provision – 1/2; coal reserves – 1/10. In Liaoning, iron, boron, magnesium, diamond, steatite, boulder

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reserves are the first in the country; Liaohe Oil Field with 15 percent petroleum and 10 percent natural gas reserve is the third in China. The Northeast is a production base for heavy industries, especially equipment and raw material production. A total of 4,187 state and state-holding enterprises constitute 10.2 percent of the country. Their asset value is 1,324.1, billions, 14.9 percent of the country total (http://chinaneast.xinhuanet.com/2004-10/28/content_3115778.htm). Proportions of the leading industries are: power station equipment is 1/3 of the country; crude oil output is 2/7; ethane output is 1/4 of the country; steel output is 1/8 of the country; the output of shipping manufacture is 1/3 of the country; the output of automobile manufacture is 1/4 of the country (http://chinaneast.xinhuanet.com/ 2004-10/28/content_3115778.htm). In the 1950s, Liaoning as an early industrial area produced the first furnace steel, the first large-scale transformer of electricity, the first jet plane, the first 10,000 ton ship designed by Chinese, the “new pattern” locomotive, etc. However, in 1980s, the region was not adapted to new technology. Even now, the heavy chemical engineering products constitutes up to 75 percent of the regions’ products. Most industries are traditional and low tech. From an economic growth standpoint, it represents high investment, high consumption of resources and high pollution, but low output, low efficiency. In 2004, its GNP was 1/20 of the country total, but energy consumption was almost 1/10 of the total. In sum, Liaoning is large but neither strong nor advanced. The present problems on innovation in Liaoning are reflected in: . R&D investment rate as a percent of gross sale is around 0.7-0.9 percent,whereas it has been 2.5-4 percent in some developed countries; . the transfer rate of S&T results is very low: only around 20 percent research results contribute to productivity every year;

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the export rate of high-tech products in Liaoning is only 1.76 percent of China, whereas it is 40 percent in Guangdong Province;

Nevertheless, Liaoning has significant advantages. In 2005, it has three national and four province-level advanced and high-tech development zones. Up to the end of 2004, 11,274 enterprises have been registered in them, including 1,574 foreign capital enterprises and 51 branches of “World Top 500” Firms. Province government has recognized 831 among them as “advanced & new-tech enterprises.” In 2004, their Gross Industry Product was 96 billions, occupying 12.1 percent of the total province (Source: S&T Department of Liaoning Province; see www.chinahightech.com/chinahightech/ News/View.asp?NewsId ¼ 8313237353). It also has 34 institutions for graduate education, 76 general higher education institutions, 659,400 university students, 1,300 research institutes, over 1,500,000 S&T practitioners. It has been recognized as necessary to mobilize S&T resources for regional development, especially from leading regional universities such as NEU. NEU began in 1922-1923 when several scholars appealed to the head of the Northeastern Army Zuolin Zhang, to establish a university to make a strong Northeast China. The first President was then Governor Yongjiang Wang. These leaders defined the special political background of NEU and shaped its original educational idea to integrate theory and practice. At the beginning, the university set up a factory to provide students with practice experience. In August of 1928, the renowned patriotic Marshal Chang Hsueh-liang, Zuolin Zhang’s son, took the post of university president. He identified “exploring profound problems, training professional talents” as a guideline, settling a strong research atmosphere. In 1953, the university administration made a decision to gradually strengthen S&T research. Together, with its neighbor, the Institute of Computer Technology of Chinese Academy of Sciences, NEU developed China’s first computer of in 1958. In 1978, NEU’s administration announced a development plan to strengthen research when its graduate education was revived. NEU now has 1,879 faculty and 20,116 undergraduate students, 5,787 postgraduate students (including 2,208 PhD candidates). In addition, it has 51 specialties and 170 disciplines which can train postgraduate students, as well as three training stations for professional degrees: MBA, MPA and Master of Engineering, 81 disciplines which may award PhD. It also has more than 70 research units; four national engineering (technology) research centers and one national laboratory. NEU’s total area now is 2,030,000 m2 (www.neu.edu.cn/). NEU entered the national “211” and “985” Projects and has been supported by central, province and local level governments. During “the Tenth Five Plan” over 100 research projects such as National Key Technology R&D Programme, “863 Project” and commercialization of advanced and high technology were carried out by NEU faculty. Some of the research results were transferred to industry or became the base to build UREs (www.neu.edu.cn/). 5.2 Industry-university collaboration In the early 1950s, President Shuliang Jin initiated a university-industry cooperation model on the ground of reciprocal principles that has formed a tradition of the industry-university linkage. In fact, from 1950s NEU has been requested to meet local industrial needs. This reflects in setting of its disciplines and specialties. For the

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industries in the area primarily concentrated heavy industries like mining, machine tools, and metal smelting, advantage fields of NEU lay in relevant disciplines. Since, China’s reform and opening a huge “industrial gap” appeared as traditional industries withered away in the face of an international tide of advanced and high-tech industry during 1980s and the early of 1990s, Most companies expected the government to save their lives. Indeed, Liaoning Province government attempted to make industry-university bridges to improve existing industries. NEU also tried to help industry overcome this difficult period. On one hand, university resources were insufficient; on the other, thousands of research results by faculty and students were not being utilized. Thus, the university that needed money and an opportunity for knowledge application and industry that was starved for new technologies and ideas found the best partners in each other. The premise of university’s cooperation with industry is needs and consensus. For example, MIT loss of state government funding in the early twentieth century led it to use an industrial solution to resolve its financial crisis (Etzkowitz, 2002). Reversely, industry also needs university’s aid. Government provides bridges and channels to enhance the collaboration. Universities have an obligation to aid industries but are in a passive position waiting on requests and funding offers. The objective of industry-university collaboration is to meet needs from industry. The university focuses on taking industrial funds and applying knowledge to resolve problems in practice with industrial enterprises the organizers and designers of these innovation activities. Another kind of collaboration is university-industry collaboration, attaching most importance to the needs of universities. Indeed, US research universities always try to find university-industry collaboration, rather than industry-university collaboration. Both kinds of collaboration should co-exist. But the proportion of university-industry collaboration is increasing, as university’s role evolves. 5.3 The first science park in China and NEU entrepreneurship Cognitive changes in a growing number of disciplines and scientific fields open up possibilities to scientists to meet two goals simultaneously: the pursuit of truth and profit-making (Vaile and Etzkowitz, 2005). This is the base on which modern science park is created. In the mid-1950s, when one of the transistor inventers, William Shockley, established Shockley Transistor Company, whose spin-offs (Fairchilld Semi-conductor and Intel), and the establishment of the new Industrial Park of Stanford University, became the building blocks for the transition of an agricultural region into Silicon Valley (Berlin, 2005): China’s first software expert Xuan Wang had recently completed high school and the key founder of the first science park of China, Jiren Liu, was not born yet. However, since 1988, during only 23 years, science park enterprise has developed quite fast. Up to 2005, there have been 50 science parks across the country. The statistics for 49 science parks reflects the general situation (Table I). According to the strategic plan in 1999, during the tenth five years plan, China would set up 100 science parks and achieve 100 billion technology, industry and trade income. In the history of science park development in China, the first science park established by NEU played a vital role. Its success became an example to other science parks in China in the 1990s. So far, there have been 61 “National University Science Parks” in China.

Before 1988 when the science park was founded, industry-NEU collaboration had achieved distinct results. Collaboration included the following four aspects: consulting for enterprises; working together to resolve difficult problems; joint venture to form new companies; and training technology workers for enterprises 1988 was a vital turning point to NEU. The university administration decided to expand its entrepreneurship activities and at first proposed creating the S&T Development Zone of Nanhu near the campus, including Science Park of NEU and Sanhao Electronic Street. The university designated 8,000 m2 of land to the science park. The school wall between Sanhao Street and NEU was torn down. This meant that the “university-industry wall” in people’s minds also collapsed significantly. In this way, the forms of its technology transfer to industry included a new item: firm formation. As a result, a few professors transformed from serving for enterprises into creating enterprises for themselves as entrepreneurs. The science park not only provided an ideal ground for university-industry collaboration, but also an arena for their entrepreneurship. As the first Chinese member of the International Association of Science Parks, the Science Park of NEU has provided a unique model. Three parks (Scientific Park, Entrepreneurial Park and Industry Park) are combined into one body to develop harmoniously. The Scientific Park is a virtual area, which is constituted by on-campus stress labs, engineering centers, research, institutes. It provides technology transfer and high-tech firm formation with technological resources. The Entrepreneurial Park aims at incubating new high-tech firms, transferring research results and training entrepreneurial talents. Industry parks may be found in different high-tech development zones all over the country, including the one in Shenyang, consisting of the enterprises graduated from the Entrepreneurial Park. They are both actors and disseminators of technological innovation. Up to 2005, it has had 450 enterprises located in the park. Among them, 110 high-tech enterprises rely on NEU. In 2005, enterprises controlled directly or through stock held by NEU created RMB 2.58 billion (approximately $ 0.31 billions) market incomes, whereas the total income of the science park had reached RMB 10 billion (approximately $1.18 billion). NEU Science Park actively closes to development of the local industries. Its incubator focuses on IT, new material, advanced equipment, and light mechanical and electrical integration (Tables II and III). In Liaoning, every advanced and high-tech area has its official incubator facilities. To date, 1,150 firms have been incubated. In addition, there are 34 non-government

Incubators number Possessing ground area (million m2) Incubating enterprises number People’s number in incubating enterprises Number of new incubated enterprises Accumulative total of graduated enterprises

2002

2003

2004

2005

58 1.45 2,380 51,576 867 720

58 5.784 4,100 70,855 1,099 584

46 4.853 5,037 69,644 1,156 1,256

49 5.005 6,075 110,240 1,213 1,320

Note: Data from 2004 all came from National Science Parks Source: Analyzed Report on National Science Parks, www.chinatorch.gov.cn/yjbg/200610/102.html

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Table I. 2002-2005 general situations of National Science Parks (incubators)

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incubators with 652 firms. Provincial government looks to enterprises as the subject of technological innovation, but asks university and research institutes to work with them to achieve innovation. Government directly supports university-industry link through policies and funds; indirectly through building science and technology development zone, technology market, platform for information service and network for large instrument use.

120 5.4 Entrepreneurship and rapid growth of Neusoft Group Co., Ltd In China, the development of UREs is a key indicator for university entrepreneurship. UREs and “spin-offs” have differences in nature according to triple helix-field conception with URE’s remaining internal for a long period of time while spin-offs separate relatively quickly from their academic source (Zhou, 2001; Etzkowitz and Zhou, 2007). UREs generally have three characteristics: (1) the university takes ownership of its UREs; (2) university staff or students (alumni) typically start UREs and run them by themselves, especially at their very beginnings; and (3) UREs mainly rely on the R&D in their mother universities. Therefore, UREs actually are “enterprises possessed by universities,” although recently a few have become “public companies” through the stock exchange. Having played an important role in NEU’s entrepreneurial transition, Neusoft Group Co., Ltd (Neusoft) originated from the NEU campus and has become a leading software enterprise in China. The primary branches include Neusoft Software Park Industrial Development Co., Ltd (Neusoft Development), Neusoft Medical System Co., Ltd

1993 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Total Table II. 1993-2005 enterprises entered the incubator

Incubating enterprises Graduated enterprises

1 0

2 1

2 2

3 1

3 2

8 8

3 7

14 4

32 0

2 0

70 26

Source: Author collected from the www.neu.edu.cn

Industrial sector

Table III. Enterprises incubated by incubator of NEU Entrepreneurial Park

0 1

Number of incubating enterprises Number of graduated enterprises

Light Energy technology mechanical Biopharmand and Equipment electrical Environment ceutical energy and IT/ New industry Others protection automation material manufacture efficiency integration

40 (7)

6

4

2

8

4

0

6

15

4

3

2

1

0

1

0

Source: Author collected from the www.neu.edu.cn

and Neusoft Joint Stock Co., Ltd At present, it consists of eight regional headquarters, 40 branch institutions and has affiliates in the USA and Japan. According to CCID 2005-2006 China Out-sourcing Market Report, in 2006 Neusoft ranks the first in China, with the $101 millions revenue, 61.1 percent increasing rate and 7.1 percent market share (http://chinaneast,xinhuanet.com/2007-03/01/content_9392125.htm). In 1989, based on the recently established software and network workshop of the computer department, three young professors who returned from the USA, Canada and Japan as well as several PhD candidates started their entrepreneurial dream in two classrooms of NEU with RMB 30,000 and three computers. The original idea was only to build an advanced lab in network and software technology to continue their research started abroad. However, financial problems compelled them to consider business activities: providing knowledge as credit and using clients’ facilities to carry out the projects. The next year they founded “NEU Software Center” and in 1991 organized a joint venture NEU-ALPINE together with ALPINE company of Japan. Two years later, Neusoft became a joint-stock company and was identified as a National Engineering Research Center of Computer Software by the former National Planning Committee of the People’s Republic of China. On June 18 of 1996, Shenyang NEU-ALPINE Software Co., Ltd was marketed on the Shanghai Stock Exchange, becoming the first professional software enterprise that went public. In 1998, NEU-ALPINE renamed Neusoft Group Co., Ltd established a joint venture with Shanghai Baosteel Group Corporation to build Neusoft. Such a series of measures ensured multiple sources of investment for Neusoft’s effort to achieve innovation and development. The main founder of Neusoft, Jiren Liu (1955 , ) is the first PhD of China in computer applications. He is not only the president of Neusoft, but also a vice-president of NEU, director of National Engineering Research Center of Computer Software. He graduated from NEU where he got his bachelor, master and PhD in computer software specialty of Electronic Department and has worked for the university since 1982 as a faculty member. Under his management, Neusoft’s property has grown from $250,000 into $556 million. In 2005, its sales income achieved RMB 2.7 billion (approximately $320 million). It has developed from the original three co-founders to over 8,000 employees, from 2 to over 10,000 stockholders. Neusoft, China’s Microsoft, appeared in a non-top ten university, NEU in Shenyang of China’s Northeast which had fallen behind the wave of reform and opening rather than in southern China where there is a strong entrepreneurial atmosphere or Peking or Shanghai with their entrepreneurial elite. In addition to smart university leaders, the opportunity from local industrial development, good government policies, the most important factor is that it has an excellent president, Jiren Liu. Neusoft exemplified again that, in the process of university entrepreneurship, some individual heroes played a key role, for example, V. Bush at MIT, F. Terman at Stanford, Xuan Wang at Peking University, etc. They are typically not “bookworms,” but superexcellent scholars who acknowledged that research should have the best application. NEU continuously selected excellent senior students in computer department and gave them a special training to work for Neusoft.

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5.5 NEU administration and government support to the UREs Although a few universities were highly involved, most American research universities over the first three-quarters of the twentieth century were reluctant to become directly involved in patenting and licensing (Sampat, 2006; Etzkowitz, 2002), China MOE commands universities to establish the “group company” to separate UREs and their main body. Thus, S&T Enterprises Group of NEU was established in August of 2005. In the 1980s, most UREs were low-tech, traditional, joint and service enterprises. Since, the early 1990s, UREs’ components have changed a lot, becoming a mixture of low and high tech, traditional and modern, joint and independent enterprises in service, marketing and production industries. It reflects discipline distribution and specialty highlights. The University-Enterprise Cooperation Committee of NEU was established in 2001, constituted by the Economic and Trade Committee of Liaoning Province Government and includes representatives of the educational department, NEU and 35 firms. The latter comprises most relevant large-scale state enterprises in the province. Government as a “regional innovation organizer” plays the leading role in university-industry cooperation for innovation. According to relevant rules, NEU must reveal its newest research achievement to the membership enterprises, and at the same transfer technology to them in priority. Secondly, in the selection of research problems and training talents, it should consider the needs of membership enterprises. Similarly, membership enterprises should issue their technology needs and problems firstly, to NEU to resolve. The university is expected to serve local innovation in three ways: providing entrepreneurship education; helping industry resolve problems, or jointly establish some R&D centers with it; and supporting UREs, especially from the research in its labs. Industry is encouraged to rely on university research to renew existing or achieve new technological innovation and products. Provincial government also tries to build a platform for enterprises to access universities, to directly support university and industry through making financial resources available to them, including those from Ministry of Science and Technology, Ministry of Education, China Academy and China NSF. The provincial government also organized some big projects by itself. In the first year of the committee’s establishment, over 500 industry-university contracts were signed; the total amount reaching RMB 270 million, creating an economic interest of RMB 2 billion. As NEU-ALPINE grew up, in 1996, Shenyang municipality decided to grant land for it to build NEU Software Park. University entrepreneurship is greatly supported by policies and funds. Moreover, government leaders often visit and resolve its difficulties. In order to support UREs, in the end of 1980s, NEU proposed its “123 guideline,” viz. one fundamental point: fostering talents; two centers: teaching and research; and three functions: dissemination, production, and application of knowledge, forming a consensus atmosphere of university entrepreneurship. Moreover, its administration supports UREs’ development with funding and policies. NEU support for UREs has undergone three stages (Zuo, 2005). The first is “making a reservoir to foster fish”: university possesses and runs UREs. The university set up an internal fund of about annual RMB 1 million to encourage fundamental research. Moreover, it does not take any fee within the first three years from its UREs. The second stage is “incubating and flying a kite”: university possesses but does not run UREs.

The university held that since there are different criteria in academy and industry, UREs should not operate like an academic institution. It instituted the policy of “three unlashes”: (1) Unlash hiring system. UREs may hire employees by themselves. (2) Unlash distribution system. UREs may distribute the profit by themselves. (3) Unlash promotion system. UREs may give employees promotion according to his/her contribution. In this way, Neusoft operates following a firm model beyond an academic institution. Since, Neusoft has been to Shanghai Stock Exchange, NEU only possesses 20 percent of its stock share. In order to better manage UREs, NEU built the Science and Technology Enterprise Group Co., Ltd with its own organization structure and rules in 2003-2004, obeying the university administration in principle. The third stage is building a new type of industrial park to let UREs expand and completely enter industry. INEU’s Science Park aims at transforming university research into productivity, whereas the new industry park aims at following international advanced S&T to facilitate economic development. It will concentrate on attracting multinational corporations to locate their R&D institutions in it, by providing a beautiful environment and excellent employees. The industry park near the new campus will offer more opportunities for university technology transfer and entrepreneurship. Another important factor is transformation in the criteria of academic assessment by university administration. The market has become a criterion to assess academic level and the value of technology results. In the past, the number of publications, various rewards and invention patents decided academic level of a professor. A society can allow some scholars to make theoretical assumptions, but it cannot afford most professors or researchers to make inoperable inventions and patents. NEU’s orientation encourages faculty and students to work for applied-oriented research, viz. Pasteur Quadrant (Stokes, 1997). For example, in 2002, a fundamental research named “to achieve Grain Refinement in Rolling of New-generation Steels Material” and “Advanced Manufacturing Technology of 500 MPa Carbon Steel” took the lead in producing in 2050 product line of the hot rolling of steel in Shanghai Baosteel Group Corporation. Moreover, No. 2 production line of Fushun Steel Corporation, with the help of “Production Process of Clean Steel” offered by faculty of NEU, increased sales income of 2002 to RMB 215 million. These achievements are all considered as factors for faculty to be promoted. 6. Conclusion Government-pulled þ industry-university collaboration is an important stage in the evolution to a triple helix innovation model. The evolution points to a co-existence of industry-university and university-industry collaboration, as well as a triple helix with a mixture of government-pulled, corporate-led and university-pushed model (Etzkowitz and Zhou, 2007). Indeed, a convergence between spin-off and e-enterprise models may be identified in exemplary cases. For example, Stanford has moved form a position of taking no equity to accepting minority equity positions and making investments in firms emanating from the university that have been successfully vetted by its OTL and its president northeast is moving from fully control by university to

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partial control, with the university becoming an independent entity, initially to reduce the universities legal liability and then to allow the firm, which may have grown to a large-scale than the university (at present 8,000 employees in comparison to the university’s 2,000), to operate as a relatively independent entity, of course, subject to ultimate government control. In the government-pulled model, government can call on university to participate in innovation anytime and anywhere. To pull university and industry for innovation, the Chinese government is both RIO and main investor. Since, research results with commercialization potential were rarely transferred into industry, China’s university has to fulfill technology transfer, on one hand through university-industry collaborations, on the other hand, establishing “high-tech UREs” to achieve knowledge capitalization. The tradition to serve for economy and society and state needs to be fulfilled by making university entrepreneurship feasible. The Neusoft story illustrates that a university may use the research fields in which it holds a comparative advantage as an entrepreneurial breakthrough point to drive other disciplines and fields. NEU is unlike Tsinghua University, which has strengths in multiple disciplines, but its computer science and technology (software field) is distinct. Effective entrepreneurship over 20 years makes its computer discipline number one across the country, encouraging entrepreneurship and discipline development simultaneously. A case study of NEU of China shows that UREs are transforming from universityrun to university-owned but firm-run and then to “public” even multinational enterprises in which the university only shares a modest part of the stock. Put differently, UREs are undergoing an “evolution” from the core area to the outside field space, becoming spin-offs. Neusoft with other stockholders, such as Shanghai Baosteel, Huabao Trust, ALPINE, Toshiba, Philip and SAP Company, has provided a prototypical example. The university will constantly benefit from enterprises it creates and at the same time contribute to industry, not only through collaboration but also through entrepreneurship. There are many factors that decide entrepreneurial success, such as cultural tradition, practice base, strong needs from local industry development, productive academic results available to be capitalized and emergence of excellent entrepreneurs. However, in China, government’s leading and organizing role, organizational mechanisms and policies in university technology transfer and entrepreneurial talents are the most important factors. In fact, technology transfer through an entrepreneurial approach is a process of new knowledge spillover and practical application. Entrepreneurial professors in universities actually are “transmission agents” for S&T information. The existence of such a group of agents is vital for a university entrepreneurial approach to be successful. NEU has a sufficient foundation to transform itself into an entrepreneurial university. Indeed, as its research ability increases, it will evolve in an entrepreneurial mode. MIT integrated various academic formats, including the classical teaching college, the polytechnic engineering school, the land grant university and the research university into a unique configuration, entrepreneurial university (Etzkowitz, 2002). China’s universities, to a great extent, have a tradition similar to US land grant universities, with an historical connection to regional industries. The Chinese approach to the entrepreneurial university starts with a government-pulled regional innovation

and industry-university collaboration, that subsequently contribute to a triple helix interaction as a relationship among independent actors, through developing university-industry collaboration and high-tech entrepreneurship. From NEU’s evolution, we learnt that: . To evolve to an entrepreneurial university needs not only university-industry linkages but high-tech entrepreneurship such as firm formation (startups). . The first step to an entrepreneurial university is to commit itself from industry-university collaboration to university-industry collaboration. . “Steeple excellence” strategy is good for a university, which has limited research resources and fund for entrepreneurship. For example, Neusoft as a pioneer played an important role in NEU’s development. . Evolution to the entrepreneurial university can be pulled by government policies, pushed by industrial needs, co-evolving with regional development. Indeed, a convergence between spin-off and URE models may be identified in exemplary cases. For example, Sanford has moved from a position of taking no equity to accepting minority equity positions and making investments in firms emanating from the university that have been successfully vetted by its OTL and its president. Northeast China is moving from fully control by university to partial control, with the university becoming an independent entity, initially to reduce the universities legal liability and then to allow the firm, which may have grown to a large-scale than the university (at present 8,000 employees in comparison to the university’s 2,000), to operate as a relatively independent entity, of course, subject to ultimate government control. References Berlin, L. (2005), The Man Behind Beyond the Microchip: Robert Noyce and the Invention of Silicon Valley, Oxford University Press, New York, NY. Bush, V. (1945), Science: The Endless Frontier, US Government Printing Office, Washington, DC. Etzkowitz, H. (2002), MIT and the Rise of Entrepreneurial Science, Routledge, London, p. 43. Etzkowitz, H. (2003), “Innovation in innovation: the triple helix of university-industrygovernment relations”, Social Science Information, Vol. 42 No. 3, pp. 293-338. Etzkowitz, H. (2006a), “Making science cities: the ‘triple helix’ of regional growth and renewal”, available at: www.ncl.ac.uk/sciencecity/academic_paper.pdf Etzkowitz, H. (2006b), University-Government-Industry Triple Helix, Peoples Press, Beijing. Etzkowitz, H. and Leydesdorff, L. (2000), “The dynamics of innovation: from national systems and ‘mode 2’ to a triple helix of university-industry-government relations”, Research Policy, Vol. 29, pp. 109-23. Etzkowitz, H. and Pique, J. (2005), “Silicon Valley in transition from network to gravitation field”, paper presented at International Association Science Park Conference in Helsinki. Etzkowitz, H. and Zhou, C. (2007), “The theme paper for triple helix”, paper presented at VI International Conference, Singapore, available at: www.triplehelix6.com Hafner, K. and Lyon, M. (1996), Where Wizards Stay up Late: the Origins of the Internet, Simon & Schuster, New York, NY, pp. 13-17.

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Leydesdorff, L. and Etzkowitz, H. (2001), “The transformation of university-industrygovernment relations”, Electronic Journal of Sociology, Vol. 5 No. 4. Mowery, D. and Rosenberg, N. (1998), Paths of Innovation: Technological Change in 20th Century America, Cambridge University Press, Cambridge. Sampat, B.N. (2006), “Patenting and US academic research in the 20th century: the world before and after Bayh-Dole”, Research Policy, Vol. 35 No. 9, pp. 1261-440. Stokes, D.E. (1997), Pasteur’s Quadrant: Basic Science and Technological Innovation, Brookings Institution Press, Washington, DC. Vaile, R. and Etzkowitz, H. (2005), “Third academic revolution: polyvalent knowledge”, The “DNA” of the Triple Helix – The 5th Triple Helix theme paper, Turin, Italy, May, available at: triplehelix5.com Zhou, C. (2001), “Science and technology field”, Science of Science and Management of S&T, Vol. 22, pp. 13-15. Zuo, L. (2005) in Zhong, G., Xiao, G., Chan, Y. and Hua, Y. (Eds), Fulfilling the Second Span of S&T Industries, Vol. 8, Zhong Guo Gao Xiao Yu Chan ye Hua. Corresponding author Chunyan Zhou can be contacted at: [email protected]

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Book review China’s science and technology capacity building: global perspective and challenging issues

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Innovation with Chinese Characteristics Edited by Linda Jakobson Palgrave Macmillan Publishing 2007 Hardback 178 pp. ISBN 978-2-230-00692-8 Keywords China, Nanotechnology, Innovation, Energy technology, Biotechnology Review DOI 10.1108/17468770810851548 “China phenomena” is changing the knowledge balance of the world. Many countries, in particular, western countries, are carefully following the development and change of China’s technology system and innovation policy. China’s ambition of becoming “an innovation-oriented country” by 2020 and the “world’s leading science power” by 2050 has drawn world attention. China’s leaders wish to see the country transformed into an innovation-oriented society in a short amount of time. After heated debate on whether China’s technology strategy of obtaining technology by sacrificing its market has partly failed, Chinese enterprises are to become less reliant on foreign technology. As a matter of fact, technology transfer between developed and developing countries possesses strategic significance in science and technology (S&T) capacity building. However, developing countries, such as China, need to understand explicitly that “real core technologies” cannot be purchased but can only be achieved by developing “indigenous innovation”[1]. Therefore, there is a growing need to consolidate the technological capacity building and to develop the strategy of technological innovation. China’s increased prominence in international and regional S&T affairs has created a growing need for a deeper and more sophisticated understanding of the structure, operation and performance of China’s S&T system. A broad range of policies and programs have been put in place over the last two decades to initiate major improvements in the country’s innovation system. In the first chapter “China aims high in science and technology” Linda Jakobson discusses how China’s leaders have made “indigenous innovation” a cornerstone of the country’s future development. Many indicators and statistics, such as: the number of science and engineering papers published by Chinese researchers in international journals, the amount of investments made in research and development (R&D), and the number of patents, indicate that China’s S&T capacities have been developing quickly. In the meanwhile, China’s

Journal of Technology Management in China Vol. 3 No. 1, 2008 pp. 127-129 q Emerald Group Publishing Limited 1746-8779

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research environment has often been criticized as detrimental to individual creativity, corrupt and too politically charged. S&T policy makers have been regarded as overbearing and researchers in China have faced numerous hurdles. It should be noted that the education system in China is much based on rote learning, where students tend not to be critical thinkers. This is in contrast to a western educational system, where students are encouraged to challenge professors and develop independent thinking. The Chinese tradition of deferring to authority is not conducive to innovation. Under such, how realistic is the ambition to make China an innovative nation by 2020? Nonetheless, China’s legacy is that the country has become second only to the US in terms of GDP as expressed in purchasing power parity. China’s remarkable global economic impact presents outstanding and interesting innovation. How could a small village like Shenzhen become a large city of 10 million people in a mere 28 years?[2] How could local Chinese firms, such as, Haier, Lenovo, become world famous brands in such a short period? Some observers believe that these remarkable achievements can only be done in China, as a result of the radical economic reform, Chinese characteristics and the entrepreneurial spirit. Researchers have made interesting comparisons between American and Chinese style management. It is noted that the American style management is embedded in the process of self-actualization. For example, it focuses on “management by objectives” and “management by result.” However, the Chinese style management concentrates on the philosophy of “self-disciplinary first and then managing people” under the Confucius philosophy. There is no doubt that Chinese style management will have an important position in the management field in the twenty-first century. However, this does not mean that western style management will be replaced by Chinese style management. China’s ambition of becoming “an innovation-oriented country” by 2020 is not merely part of the nation’s long-term strategic plan. There have been rising policy initiatives gearing towards the development of S&T. In the introduction to this book, Jakobson demonstrates that China’s S&T prowess is expanding. This is underpinned by the national network of S&T’s research of 5,400 national governmental institutions, 3,400 university-affiliated research institutions, 13,000 research institutions operated by large state enterprises, and 41,000 non-governmental research-oriented enterprises. According to the Chinese Government’s plan, budget in R&D is to increase substantially. By 2010, China’s investment in R&D will account for 2 percent of GDP, compared to 1.34 percent in 2005. By 2020, the figure will have increased to 2.5 percent of GDP. If realized, this significant investment will put China on the same level as several countries of the Organization of Economic Cooperation and Development and China will surpass the European Union in R&D investment intensity. However, an appropriate and effective S&T strategy will play a vital role in China’s S&T capacity building. Against such a backdrop, Linda Jakobson’s book, Innovation with Chinese Characteristics, is very timely, providing strategic insights for decision makers in the field of S&T, not only in China but also in the west. The book shows readers a clear picture of how China has developed its S&T and sheds light on China’s S&T capacity building. It is useful information for academics, researchers and business executives who have an interest in understanding China’s S&T policy. The first chapter “China aims high in science and technology” written by Linda Jakobson and the second chapter “China’s push to innovate in information technology” by Arthur Kroeber, paint a picture of China’s S&T landscape, assessing

the current state of the policy framework and the development of China’s S&T, and addressing the challenges that China faces as it pursues its goal to become a technological superpower. The authors ask fundamental questions concerning innovation with Chinese characteristics after examination of China’s S&T policy framework and the education system, which are thought provoking. The useful analyses on crucial issues of China’s innovation and S&T strategy have benefited from the authors’ in-depth understanding of China. The remaining chapters, “Nanotechnology research in China”; “Energy technology research in China”; and “Biotechnology research in China” present an overview in each area in terms of the development and policy framework. These chapters are informative and reliable resources. The strategic insights on the future of China’s R&D in nanotechnology, energy technology and biotechnology have clearly benefited from the authors’ cutting-edge and quality research. The authors are internationally respected scientists in their fields who provide an invaluable source of material for practitioners and academics who are interested in China’s innovation strategy and R&D strategy – an area where there is little or no information available. I particularly like the blending of academia with practice, which runs throughout the book and which is one of its major strengths. If there is any omission or weakness in this book, it is in assessing and making a strong connection between technology transfer, which contributes strategically to S&T capacity building, and innovation. This is an area where the editor has contributed more. China’s most recent S&T catchphrase zizhu chuangxin has been interpreted in “independent innovation” or “indigenous innovation” I would like to further point out that the title of the book – innovation with Chinese Characteristics, is well thought out and appropriate. It benefits immensely from the editor’s profound knowledge of China. Linda Jakobson, the Editor, is Beijing-based Director of the China Programme at the Finnish Institute of International Affairs. She is in a unique position to observe developments in both China and the west, and particularly the way in which the two cultures interact as she was born in the west, but has lived for 14 years in China and other parts of East Asia. She has built up a considerable expertise in the area of technology innovation in China. A Mandarin speaker, she has a unique vantage in understanding and interpreting China. She has published five books on China and East Asia and is an internationally recognized authority on China. Richard Li-Hua Northumbria University, Newcastle upon Tyne, UK Notes 1. Remarks of Hu Jintao of President of China and Chinese Communist Party General Secretary. 2. According to Xinhua News, August 21, 2005, Shenzhen had 4.32 million permanent residents and more than 6 million immigrants who make their livings as temporary workers or in child care in the city. About the book review author Richard Li-Hua is Editor of Technology Management in China and Co-Chief-Editor of Chinese Economics and Foreign Trade Studies. He is also the Founder and President of China Association for Management of Technology. Richard Li-Hua can be contacted at: [email protected]

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