With leading technologies and patents, firms can achieve leadership position in the global market

Recently, School of Management of Zhejiang University, HSBC (Hong Kong and Shanghai Banking Corporation) and CBN (China Business Network) Research Institute jointly launched a project on a white book on innovation to describe the innovation path of Chinese companies. The book will be officially released in October this year. In the book launch event, Prof. Can Huang, Head of Department of Innovation, Entrepreneurship and Strategy at School of Management was interviewed by CBN. During the interview, Prof. Can Huang argued that for Chinese companies, technological innovation is the key for them to achieve leadership in the global market. Without holding patents, they can hardly succeed in the global market in the long term. 

1. Which companies have been studied by School of Management, Zhejiang University with the focus on innovation and entrepreneurship?

 Prof. Can Huang: Unlike many other top business schools in China, we build up close cooperation with various companies, such as Huawei, Haier, Midea, Geely, and Royal Philips. With the establishment of a number of joint research centers, we undertake high-level academic studies that also provide implications for companies’ business operation. In addition, the School also maintains cooperative relationship with the world-class universities such as Cambridge University and Stanford University. The ongoing and future work of our team is to conduct research on Chinese enterprises in a systematic way and develop theories that can guide the management practice in Chinese companies. We hope to contribute to the transformation and upgrading of Chinese firms and the development of innovation management theory. 

This time we feel very honored to be able to work with CBN and HSBC, combining our academic research with business practice. Since Shanghai aims to become the Global Science Center, it is very important for us to discuss innovation issues here. 

2. How would you describe the competition and cooperation between Chinese and multinational companies? 

Prof. Can Huang: Multinational companies used to be teachers, and Chinese companies used to be students. However, I think in the future the relationship between multinational and Chinese companies will change into mutual learning. Now multinational companies also learn from local companies in China with regard to their response speed and customer service.

I believe that in the future more and more firms similar to Huawei will rise in China, and Chinese companies will win a place in the world. For example, Huawei is regarded as a role model by many Chinese companies. In the field research, we found that even in a tiny company, executives would ask us whether they can learn from Huawei. When Huawei began to share management experience, many companies are attracted to send executives to learn, and afterwards they feel encouraged to pursue their own glories. 

In my view this power will be passed on. Particularly, if scholars can summarize the management practices of leading business and disseminate them, they will be able to help more companies to learn how to innovate. I believe that in the next decade, more companies like Huawei will emerge in China. 

3. Do you agree that the competition between firms in innovation is to some extent the patent competition? 

Prof. Can Huang: A few years ago a patent war broke out among major mobile phone manufacturers. Most of the leading companies were either sued by others or sued somebody else. For example, as one of the worlds cash-richest companies, Apple was not afraid of having litigations with anyone. During that period, Apple filed many patent lawsuits against mobile phone manufacturers in the Android camp, trying to delay the development of the Android mobile phones and sustain its own competitive advantage.

Nowadays, many Chinese high-tech companies are often handicapped by the lack of intellectual property rights when they go abroad. In fact, at the earlier stage, Huawei also went through a painful process, particularly when it was sued by Cisco. After the law suit, Ren Zhengfei proposed "land for peace" strategy, which says that Huawei accepts the rule of game, to respect the intellectual property rights of other companies. Since then Huawei has spared no efforts in developing its intellectual property rights, and consequently it holds strong bargaining power in IPR negotiations now. 

Huawei is the only Chinese company with the ability to lead the global market in smart phone business. Although other companies can thrive in many markets in the world, without strong patent portfolio, they cannot enter the European and American markets. Without the European and American markets, they cannot become the worlds No.1 company. 

4. What do you think of Chinas intellectual property protection? 

Prof. Can Huang: Many intellectual property industry insiders believe that China has made great progress in intellectual property protection in the recent years. On April 1, 2017, the State Intellectual Property Office of China (SIPO) revised its current Patent Examination Guidelines. The most significant change is that new guidelines make business methods and software-related inventions with technical feature eligible for patent protection in China, which comes close to the provisions of the United States and the Europe. 

Therefore, we can no longer consider China as a weak intellectual property protection country. Instead, more and more intellectual property experts hold the belief that in the future like the United States, China will become an important country for patent litigations, and it is not necessary to go to the United States to litigate because enforcement of intellectual property in China has been strengthened over time. 

5. Artificial intelligence has always been a hot topic. How do you see the future of artificial intelligence in China? 

Prof. Can Huang: All the best companies are getting down to artificial intelligence, and each of them has its own strengths. For example, focusing on after-sales services, Huawei makes use of artificial intelligence to maintain network and reduce the cost, but Alibabas focus on artificial intelligence is certainly not the same. I think many companies are now applying artificial intelligence to develop their own business. The leaders in artificial intelligence do not necessarily initiate a brand-new business, but a lot of companies will employ artificial intelligence creatively in the existing business operation.