Seven Attributes of the Most
Innovative Cultures
The roots of innovation
lie in the most basic cultural values.
As
he looks ahead to his second five-year term, President Xi Jinping surely knows
that innovation must be an economic priority if China is to escape the middle-income
trap that awaits it in about ten years. Even
amid slowing economic growth, there are signals that China may be starting to
come into its own as a global
innovator. However, even if these trends prove
sustainable, will it be too little, too late? Furthermore, can commitment to
innovation be reconciled with Xi’s increasingly
authoritarian leanings? To many of us at INSEAD – an
institution whose history of Asia business research dates from the 1970s – the
balance of power in the region, if not the world, seems largely to depend on
the answers.
Starting
with my first book, The Spirit of Chinese Capitalism (1990), I
have researched the specific capabilities that fuel modernisation within
societies, particularly as they pertain to the Chinese context. I’ve found that
as the world’s great cultures developed over the centuries, innovation
ecosystems such as Silicon Valley have never come into being with simple
spontaneity; they are the product of a confluence of social and political
forces specific to a certain time and place, yet deeply rooted in history.
Hence, innovation
is culturally agnostic in one sense and highly culture-sensitive in another.
While in theory, nothing prevents every country in the world from having its
own Silicon Valley (although it would look different from place to place),
there are seven cultural “universals” shared by every truly innovative
society – Japan and South Korea as much as the United States. As described
in my recent paper in Journal of
Interdisciplinary Economics (co-written
by Antony Drew of University of Newcastle Business School), the absence of
these seven features helps explain China’s enduring innovation handicap.
Seven features
First,
economic units, regardless of ownership, must be capable of scaling up
efficiently. Despite offering much higher return on capital than state-owned
enterprises, private sector firms in China are rarely allowed to grow unchecked
by Party co-optation. Government intervention – or the threat of same – sows
caution in Chinese entrepreneurs, especially when they are within reach of
cementing their success and influence in a way that could unsettle the balance
of power.
Second,
in the process of scaling up, organisations must keep highly creative and
skilled individuals engaged. China’s business culture concentrates initiative
at the top, giving subordinates little leeway to question or even interpret
their boss’s directives. This all but guarantees a paucity of new ideas that
only worsens as organisational growth weakens senior leaders’ connection to the
marketplace.
Third,
creative individuals need room to be adventurous. To put it another way, they
need permission to fail, which is at odds with the stringently enforced
discipline and conformity that figure heavily in Chinese social psychology. The
Chinese have, in the main, been led to expect that non-compliance and failure
may result in harsh punishment.
Fourth,
innovators need to share in the profits generated by their creative labour.
Though China has produced a crop of wealthy entrepreneurs in recent years,
capital and its use are still politicised. Unregulated economic activity is
rampant – according to state media, a recent police crackdown turned up underground
financial transactions totalling US$30 billion.
Fifth,
information must freely flow through the society in a way that fosters learning
and collaboration. In China, access to empowering information is determined by
where one stands in the hierarchy. The general public receives a redacted
version of reality, courtesy of a robust censorship regime. This certainly
helps the existing power structure keep potentially destabilising influences in
the dark, hence at bay – but it also stifles exchange, cooperation, and
ultimately innovation.
Sixth,
the ruling order must be relied upon to safeguard the wider social good,
according to consistent and clearly understood interpretations of the law. A
flourishing business culture requires a disinterested rule of law. China’s
historical tolerance for corruption is well-known – Transparency International
ranked China 27th out of 28 industrialised countries included
in the 2011 Bribe
Payers Index. Xi’s unusually spirited anti-corruption
campaign – 336,000 government officials were reprimanded or punished in 2015
alone – has served to underscore the scale and depth of the problem; rooting it
out is another matter.
Seventh,
neutrality and fairness should prevail in decision-making about risk.
Interpersonal relationships marked by ties of obligation and fealty – China’s
priceless guanxi – should yield to evidence-based judgment and
rational self-interest. No region of the world is immune: Citing bloated
public-sector employment, political scientist Francis Fukuyama argues that
entrenched systems of political patronage contribute to southern Europe’s
economic woes, relative to its northern neighbours. Dispensing with patronage
is seen by many as essential to the transition to the modern condition, and
even more so to the postmodern.
China’s innovativeness
Xi’s
campaign to make China
re-embrace Confucianism represents a return of repressed
ideals for the nation. But unlike South Korea and Japan, where profound
Confucian influences coexist with the cultural demands of modernity, China has
never thoroughly re-examined its reverence for law and order at all costs.
Surely this is down to the enormous challenges of governing 1.3 billion people.
The possibility of social and political upheaval is very real, should the Party
indulge in too much change too quickly. Yet, Xi’s apparent moves to re-establish
a Mao-like cult of personality signal an end to the era in which gradual
decentralisation of power was even up for debate in Beijing.
Along
with dashing the hopes of China’s democrats, Xi's authoritarian turn may
bring a premature close to the nation’s economic miracle story. If
anti-globalisation sentiment continues to intensify among its trade partners,
China may no longer have foreign markets to keep its economy buoyant. The
nation would then be thrown back upon its own as-yet-nascent innovative capacities,
accelerating the decline of its economic momentum. A speculative scenario, to
be sure, but one which seems at this point more likely than the best-case
scenario for China’s future: The Communist Party loosening its grip on power,
thereby releasing pent-up potential for innovation.
Gordon Redding is
an Adjunct Professor of Asian Business and Comparative Management at INSEAD
Read more at http://knowledge.insead.edu/entrepreneurship/seven-attributes-of-the-most-innovative-cultures-5135?utm_source=INSEAD+Knowledge&utm_campaign=dd55f368b3-EMAIL_CAMPAIGN_2017_01_19&utm_medium=email&utm_term=0_e079141ebb-dd55f368b3-249840429#1YsQxLKV2x7R60Q9.99
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