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Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
×

THE DRAGON AND THE ELEPHANT

Understanding the Development of Innovation Capacity in China and India

Summary of a Conference

Stephen Merrill, David Taylor, and Robert Poole, Rapporteurs

COMMITTEE ON THE COMPETITIVENESS AND WORKFORCE NEEDS OF U.S. INDUSTRY

BOARD ON SCIENCE, TECHNOLOGY, AND ECONOMIC POLICY

POLICY AND GLOBAL AFFAIRS

NATIONAL RESEARCH COUNCIL OF THE NATIONAL ACADEMIES

THE NATIONAL ACADEMIES PRESS

Washington, D.C.
www.nap.edu

Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
×

THE NATIONAL ACADEMIES PRESS

500 Fifth Street, N.W. Washington, DC 20001

NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance.

This study was supported by Contract/Grant No. SB 1341-06-Z-0011, TO #2 between the National Academy of Sciences and the Technology Administration of the U.S. Department of Commerce; Contract/Grant No. SLON 2005-10-18 between the National Academy of Sciences and the Alfred P. Sloan Foundation; and Contract/Grant No. P116Z05283 between the National Academy of Sciences and the U. S. Department of Education. Conference support was provided by the Levin Graduate Institute of the State University of New York, Indo-US Science and Technology Forum, National Science Foundation, Office of Naval Research, Booz Allen Hamilton, Eli Lilly, Inc., Hewlett Packard, Inc., and Microsoft, Inc. Additional support for this publication was provided by the Levin Graduate Institute of the State University of New York and the Indo-US Science and Technology Forum. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project.

International Standard Book Number-13: 978-0-309-15160-3

Library of Congress Catalog Card Number-10: 0-309-15160-0

Additional copies of this report are available from the

National Academies Press,

500 Fifth Street, N.W., Lockbox 285, Washington, DC 20055; (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http://www.nap.edu.

Limited copies are available from:

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Copyright 2010 by the National Academy of Sciences. All rights reserved.

Printed in the United States of America

Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
×

THE NATIONAL ACADEMIES

Advisers to the Nation on Science, Engineering, and Medicine


The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences.


The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Charles M. Vest is president of the National Academy of Engineering.


The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine.


The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council.


www.national-academies.org

Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
×

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Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
×

CONFERENCE PLANNING COMMITTEE

David T. Morgenthaler, Chair Founding Partner,

Morgenthaler Ventures

David C. Mowery, Vice-Chair William A. & Betty H. Hasler Professor of New Enterprise Development

University of California at Berkeley

Ashish Arora1 Professor,

The Fuqua School of Business Duke University

Nicholas M. Donofrio Executive Vice President,

Innovation and Technology (retired) IBM Corporation

Kenneth S. Flamm Dean Rusk Chair in International Affairs

Lyndon B. Johnson School of Public Affairs University of Texas at Austin

Richard B. Freeman Herbert Ascherman Professor of Economics

Harvard University

Mary L. Good Donaghey Professor and Dean

Donaghey College of Engineering & Information Technology University of Arkansas at Little Rock

Kent H. Hughes Director,

Program on Science, Technology America and the Global Economy Woodrow Wilson International Center for Scholars

Devesh Kapur Director

Center for the Advanced Study of India University of Pennsylvania

Thomas R. Pickering2 Vice-Chairman,

Hills and Company U.S. Career Ambassador (retired)

AnnaLee Saxenian Dean and Professor,

School of Information and

Professor,

Department of City and Regional Planning University of California at Berkeley

Denis F. Simon3 Professor,

School of International Affairs The Pennsylvania State University

Richard P. Suttmeier Professor of Political Science and Director,

Asian Studies Program University of Oregon

1

 At the time of the conference Dr. Arora was Professor of Economics and Public Policy at the Heinz School of Public Policy and Management, Carnegie Mellon University.

2

 At the time of the conference Mr. Pickering was Senior Vice President, International Relations at Boeing Co.

3

 At the time of the conference Dr. Simon was Provost and Vice-President for Academic Affairs with the Levin Graduate Institute of International Relations and Commerce at the State University of New York.

Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
×

PROJECT STAFF:

Stephen A. Merrill Study Director

Mahendra Shunmoogam4 Program Associate

Daniel Mullins5 Program Associate

Cynthia Getner Financial Officer

4

Until July, 2008.

5

Joined the STEP program September, 2008.

Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
×

BOARD ON SCIENCE, TECHNOLOGY, AND ECONOMIC POLICY

For the National Research Council (NRC), this project was overseen by the Board on Science, Technology, and Economic Policy (STEP), a standing board of the National Research Council established by The National Academies of Sciences and Engineering and the Institute of Medicine in 1991. The mandate of the STEP Board is to integrate understanding of scientific, technological, and economic elements in the formulation of national policies to promote the economic well-being of the United States. STEP bridges the disciplines of business management, engineering, economics, and the social sciences to bring diverse expertise to bear on important public policy questions. The members of the STEP Board and the NRC staff are listed below.


Edward E. Penhoet, Chair

Director, Alta Partner


Lewis W. Coleman

President

DreamWorks Animation


Alan M. Garber

Henry J. Kaiser, Jr. Professor and Professor of Medicine

Director, Center for Health Policy and Center for Primary Care and Outcomes Research

Stanford University


Ralph E. Gomory

Research Professor, Stern School of Business

New York University


Mary L. Good

Donaghey Professor and Dean

Donaghey College of Engineering & Information Technology

University of Arkansas at Little Rock


Amory Houghton, Jr.

Former Member of Congress


William F. Meehan III

Lecturer in Strategic Management

Stanford Graduate School of Business


David T. Morgenthaler

Founding Partner

Morgenthaler Ventures


Joseph P. Newhouse

John D. MacArthur Professor of Health Policy and Management

Director, Division of Health Policy Research and Education

Harvard University


Arati Prabhakar

General Partner

U.S. Venture Partners


William J. Raduchel

Independent Director and Investor


Jack W. Schuler

Co-Founder

Crabtree Partners, LLC


Laura D. Tyson

S.K. and Angela Chan Chair in Global Management

Haas School of Business

University of California Berkeley


Alan Wm. Wolff

Partner

Dewey & LeBoeuf LLP

Page viii Cite
Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
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Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
×

Preface

Until recently, competition for the United States in high technology goods and services has come from Japan and the countries of Western Europe, but this situation is rapidly changing. There has been remarkable growth in innovative capabilities in a number of countries that 30 years ago were classified as developing economies. Taiwan and South Korea, followed by China and India, are the leading examples of this phenomenon.

These developments are part of a new phase in the globalization of the innovation process. Since at least the 1960s large multinational companies from industrialized countries have been moving much of their manufacturing and some of their research and development (R&D) activities offshore, but most of the latter was restricted to development activities intended to modify existing products for foreign markets. Beginning in the 1980s, however, a new pattern began to emerge. The R&D activities that were moved offshore began to include more “upstream” activities, including original research, and the companies involved started to collaborate more extensively with universities, public laboratories, and firms of the host countries. With the disintegration of self-contained, integrated innovation chains within large companies, smaller, younger firms began to play a larger role in this R&D offshoring; and the companies involved came to include many more non-manufacturing firms than had previously been the case. Finally, the destinations of the offshored R&D activities shifted, with more going to industrializing economies, especially those in East Asia such as Taiwan and South Korea, and also to the lower-income, very large developing economies of India, China, and Brazil. In short, after an era that saw the dispersion of manufacturing activity in search of low-cost location for production, the world is entering an era in which innovation itself is far more widely distributed than previously.

For the past three years the Academies’ STEP program, with funding from the U.S. Department of Education, U.S. Department of Commerce, and the Alfred P. Sloan Foundation, has been studying the globalization of innovation with a series of activities. A pair of workshops in 2006 and 2007 and commissioned papers led to the publication of Innovation in Global Industries: U.S. Firms Competing in a New World (NRC, 2008). This collection, edited by Berkeley Professor David Mowery and Georgetown Professor Jeffrey Macher, examines changes in innovation patterns in ten service as well as manufacturing industries – personal computing, software, semiconductors, flat panel displays, lighting, pharmaceuticals, biotechnology, logistics, venture capital, and financial services.

Because of the growing importance of China and India to this process and their potential to profoundly affect the distribution of innovative activity and investment around the world, an ad hoc committee under the STEP program decided to organize a symposium focusing specifically on the role that those two countries are beginning and likely to play in the globalization of innovation. That conference, “The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India,” was held in Washington, D.C., on September 24-25, 2007, and drew participants from both countries, the Organization for Economic Cooperation and Development (OECD), and the World Bank as well as the United States. The meeting was organized with the assistance of the Levin Graduate Institute of

Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
×

the State University of New York, Woodrow Wilson International Center for Scholars, Urban Institute, and Athena Alliance.

In his opening remarks as chairman of the conference, David Morgenthaler observed that innovation can mean several different things. It can refer, for example, to producing more of what already exists and adapting existing capabilities, such as cell phone technology, to the specific needs and resources of a particular customer base, such as the populations of China or India. It can refer to institutional changes such as those needed to take advantage of technical advances or scientific discovery. And it can refer to political system changes, market improvements, and new business models.

China and India face all three challenges—development of new science-based technological advances to satisfy growing middle- and upper-class populations, technology adaption and application to alleviate great poverty, and institutional change to sustain economic progress. Because of their great size, how well India and China succeed in this endeavor will have a great bearing not only on their own populations’ welfare but also on global economic welfare. It is this grand experiment or series of experiments that the symposium participants endeavored to illuminate and explore.

The symposium was designed to offer a snapshot of where these two countries are now as they strive to improve their capacity to innovate and to explore what can be expected from them in the near future. Although many people who are unfamiliar with the situation see China and India as having very similar economic trajectories, the economies of the two countries are actually very different. Each has its own strengths as well as weaknesses and challenges to overcome in order to become a globally important center of innovation in a range of technologies and industrial sectors.

This document is a summary report of the presentations and discussions that took place at the conference. The planning committee’s role was limited to planning the conference. This summary report was prepared by consultants and the study director. The views expressed in this summary are those of the speakers and discussants and are not the consensus views of conference participants, the planning committee, the Board on Science, Technology, and Economic Policy, or the National Academies.

The organization of the document follows the organization of the symposium, whose agenda can be found in Appendix A. Chapter 1 offers an overview of the current recent performance of the Chinese and Indian economies and their roles in the global economy, while Chapter 2 describes various ways in which United States interests are affected. This is followed by a series of chapters examining the factors contributing to and in some cases inhibiting the development of world class innovation capacity. Chapter 3 discusses human capital in the two countries and summarizes the keynote speech of Satyanarayan Gangaram Pitroda, Chairman of the Indian National Knowledge Commission, whose remarks focused primarily on human capital development in India. Chapter 4 covers capital markets and investments; Chapter 5 looks at research and commercialization infrastructures; and Chapter 6 examines the legal environments in the two countries as they affect the development of innovation capacity. Chapter 7 offers a look at the two countries from the perspective of multinational corporations. Chapter 8 contains summaries of four separate breakout sessions that compared developments in four key industrial sectors in the two countries—information technology, transport equipment (automobiles and aircraft), pharmaceuticals and biotechnology, and energy. Finally, Chapter 9 summarizes some of the conference speakers’ and participants’ final observations.

An effort was made to select and guide presenters to enable comparisons between China and India along the same dimensions, but it was not always possible to adhere to this standard. For example, although the evolution of intellectual property policy in both countries has attracted much attention and was addressed in the conference, it was difficult to find experts in Indian competition and technical standards policy.

During the conference there was also a poster session in which nine young scholars presented recent research on innovation-related developments in one or both countries. The list

Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
×

of participants in this session and their research topics can be found in Appendix B.

The National Research Council (NRC) and the Board on Science, Technology, and Economic Policy (STEP) are grateful to principals of the four co-organizers of the conference—Denis Simon of the Levin Graduate Institute of the State University of New York, Kent Hughes of the Woodrow Wilson International Center for Scholars, Hal Salzman of the Urban Institute, and Kenan Jarboe of the Athena Alliance. In addition to the Alfred P. Sloan Foundation, U.S. Department of Education, and U.S. Department of Commerce the following provided financial or in-kind support without which the conference would not have been possible: The Levin Graduate Institute, Indo-U.S. Science and Technology Forum, National Science Foundation, Office of Naval Research, Booz Allen Hamilton, Eli Lilly, Inc., Hewlett Packard, Inc., and Microsoft, Inc. Most indispensable to the meeting’s success was the participation of public officials, private sector leaders, academic experts, and others knowledgeable about economic developments in China and India, many of whom traveled very long distances to attend.

This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Academies’ Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for quality and objectivity. The review comments and draft manuscript remain confidential to protect the integrity of the process.

We wish to thank the following individuals for their review of this report: Sean Dougherty, Organisation for Economic Co-operation and Development-Paris; Vinod Goel, The World Bank; Jeffrey Macher, Georgetown University; Thomas Ratchford, George Mason University; and Harold Salzman, Rutgers University.

Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the content of the report, nor did they see the final draft before its release. Responsibility for the final content of this report rests entirely with the authors and the institution.


Stephen A. Merrill, Study Director

Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
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Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
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Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
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Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
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Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
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Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
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Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
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Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
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Page xiii Cite
Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
×
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Suggested Citation:"Front Matter." National Research Council. 2010. The Dragon and the Elephant: Understanding the Development of Innovation Capacity in China and India: Summary of a Conference. Washington, DC: The National Academies Press. doi: 10.17226/12873.
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The return of the once-dormant economies of China and India to dynamism and growth is one of the most remarkable stories in recent history. The two countries are home to nearly 40 percent of the world's population, but until recently neither had played an influential role in the contemporary global economy.

In the past two decades, China and India have liberalized internal economic policy, treatment of foreign investment, and trade, and have experienced economic growth at sustained high rates. From the point of view of the United States, however, the most important development in the Chinese and Indian economies in the long term may be the strides they are making in developing their own domestic innovation capacities. After a long period of underinvestment, both countries have committed to growing their science and education systems to bolster research and further economic expansion.

Some observers of the recent growth have said that both countries are surging in their efforts to spur innovation; others have emphasized the potential of one country over the other; and still others have suggested that both China and India have a long way to go before achieving innovation-driven growth. With such a range of views, The National Academies set out to describe developments in both countries, in relation to each other and the rest of the world, by organizing a conference in Washington, D.C. The conference, summarized in this volume, discussed recent changes at both the macroeconomic level and also in selected industries, and explored the causes and implications of those changes.

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