As Alibaba unveils its IPO plans, can China leapfrog the West in the innovation economy?


For those who assume America has a monopoly on high-tech innovation, Alibaba’s float is a wake-up call. It will be larger than Amazon, eBay or Facebook. And this shouldn’t be a surprise. China is unencumbered by yesterday’s legacy. So as tens of millions of people who have never known shopping malls move from rural toil to urban lives, they are jumping straight to “e-tailing” and mobile commerce. Open-minded consumers and less regulation mean Chinese companies can launch, test and improve innovations much faster than in the West. Tencent, China’s leading internet service portal, tests new features every few weeks. And China’s vast size means that new ideas can go from zero to a mass scale that makes money almost overnight. When Alibaba launched its Yu’e Bao (“leftover treasure”) money market fund in 2013, it attracted 43m users and over £50bn of deposits in just nine months. Peter Williamson is honorary professor of international management at the Cambridge Judge Business School.


Is China going to out-innovate the West? Not anytime soon. China is making great leaps and strides, but there are a number of bottlenecks likely to hold the country back. China is investing heavily in innovation infrastructure, allocating significant budgets to research and development, and developing world-class education and training. But these are not sufficient for the creation of an ecosystem that can make China the new innovation powerhouse. A lack of strong intellectual property protection, and an education system still geared towards passive learning, represent significant barriers. Firms like Huawei, Baidu, and Alibaba have emerged as global players, but innovation is not yet part of the DNA of most Chinese firms. They rely significantly more on exploiting imported knowledge than on exploring and developing new knowledge. The capability and preparedness of Chinese firms to engage in high-risk projects represents a further significant barrier. Kamel Mellahi is professor of strategic management at Warwick Business School.

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