The findings emerging from the data suggest three innovation performance development phases that have occurred in China to date. In the current research, these phases are arranged and explained as the eras of copy and imitation; of evolution; and of revolution.
The Era of Copying and Imitation
The first chronologically identified phase was an era of copying and imitation. According to the findings, the era of copying and imitation represents an innovation performance development phase observed in China during which two different forms of global talent flow were present from the Chinese perspective: brain gain and government facilitated purposive brain drain.
This era represents a phase starting in the 1990s that formed a platform for the following innovation development phases of China. This foundation was laid on the massive knowledge and technology transfer from the west to China. Western MNCs, for example in the telecom and electronics industry sectors, took a strategic approach to move manufacturing to China while looking for cheaper labour costs and access to expanding Chinese consumer markets. This brain gain facilitated by western MNCs not only involved process and product development transfer, but also significant western input into the training of local employees. The following interview excerpt recalls a typical business start-up situation of a western MNC in China.
It was in the late 1990s. I was called and asked if I’d like to go to China to start our factory there. It was interesting but challenging. At that time, it was really difficult to find competent local staff. All the technology came from (the western) HQ and we urgently needed to transfer the processes and to train the locals in order to meet the capacity that was needed. (Former operative manager of western MNC)
The challenges described by the informants during the phase related not only to a lack of competent local staff, but also to the difficulty of managing the attrition among the MNC’s trained local personnel. This brain gain of local staff often resulted as severe intellectual property rights (IPR) problems such as imitated western products appearing in local markets, and that scenario prompted the naming of the first identified innovation performance development phase. The following excerpt illustrates the challenges related to these phenomena.
There was also a real challenge with the local staff, who would just steal the product and take it to the next house or simply leave the company with all the knowledge. They [Chinese] would just copy it, without even knowing what it was for, without having all the features of the product. Soon you would find localised variants [imitations] of those products in accordance to their local taste and needs. They have always been very good and fast at copying and manufacturing, once they figured out what and how to do that. (Former production manager of western MNC)
During this era, the respondents reported the brain gain aspect became more organised and legitimate. In the 2000s, there were approximately 600 western R&D centres in China and by 2010 that number had more than doubled (Abrami et al., 2014) . By the start of this century, the Chinese government was also focused on attracting western MNCs to form joint ventures with local organisations. Quite often however, those joint ventures were reported to have been unsuccessful, but proved to be effective sources of brain gain for the benefit of the Chinese organisations.
Many companies have been attracted to come here to form joint ventures. However, Westerners have always, in my opinion, been too wide-eyed with that. Over time theyd change the rules, the composition and ownership of joint ventures would be turned around. There were often several local companies formed based on the same imported technology, some companies were even forced to hand over their whole patent portfolio for the benefit for the joint venture. You can just imagine how that story ended up.
Eventually the joint ventures would often dry out, everything gone: the IPR, the customers... (A current western government official)
From the brain drain perspective, this era represents a phase during which atypical, but purposive forms of brain drain occurred. In contrast to the traditional format of brain drain in emerging economies, the local Chinese government was particularly active in sending talent to be educated abroad. This purposive brain drain was eventually expected to contribute to the development of Chinese innovation performance in the form of reverse brain drain.
There was a lot of Chinese talent moving abroad, they still are. Particularly the local government was sending them out to the Americas, Australia and Europe, the most talented. (Former HR manager of western MNC)
As a whole, from the pull perspective, the era of copy and imitation proved to be an effective means of transferring knowledge and technology from the western organisations to China regardless of push factors and intervening obstacles related to local culture, IPR challenges, local staff attrition, and immature legal system of China, which have caused considerations over the knowledge and technology transfer operations to China. Despite the government-sponsored brain drain, the volume of brain gain pulled by governmental actions has proved the policy successful. This innovation development phase significantly improved the capabilities of local organisations and paved the way for the following era of evolution.