Open Innovation with Chinese Characteristics

Abstract

Open Innovation in China is greatly affected by the powerful role of the Chinese Communist Party. Xi Jinping thought introduces a tension between the ‘decisive role of the markets’ to allocate resources and stimulate innovation across the economy and ‘the leading role of the Party’ to guide the development of innovation in the most important industries. This tension plays out differently in different industries in China. In high-speed rail, the tension has been adroitly managed, creating an organization with world class innovation capabilities that is a peer with the best of the rival firms in the world. In automotive and semiconductors, however, the tension has been more problematic. The state-owned enterprises are well aligned with the Party, while it is the privately owned companies and foreign companies that are driving innovation.