Will China and India Out-innovate the U.S.?

Rebecca A. Fannin (L) and Sean Randolph (R) in San Francisco on January 12, 2012. (Asia Society Northern California)

by Sun Dai and Maria Scarzella Thorpe

SAN FRANCISCO, January 12, 2012 — ASNC hosted author and expert on Asian innovation economics Rebecca A. Fannin to discuss her new book, Startup Asia: Top Strategies for Cashing in on Asia’s Innovation Boom Economy and Environment. Nixon Peabody LLP co-sponsored the event and the discussion was moderated by Sean Randolph, President of the Bay Area Council’s Economic Institute.

Fannin focused her presentation on the expansion of Asian innovation and entrepreneurship within the VIC (Vietnam, India and China) bloc, and explained some of the reasons Western businesses need to be paying attention to them. The opportunity to become wealthy and famous with a startup, she explained, “is no longer just an American dream.” It is happening everywhere, especially in Asia, as entrepreneurial talent leaves the U.S. and goes east. Venture capital investment in Asia has nearly tripled in the past five years, reaching $15.6 billion. While the European entrepreneurial environment seems “muted,” the Asian environment appears to be more dynamic and exciting, which could also make the Silicon Valley scene appear “sleepy” in comparison.

So the big question: will China or India "out-innovate" the U.S? In response to this, Fannin argues, “Not anytime soon.” She believes it may take China a decade or two to catch up with the United States, and even longer for India. Whether the next Steve Jobs, and Apple brand, will come from a country other than the U.S. is also something to see in the long run.

Here are some additional key points from the discussion Fannin and Randoph led:

  • Although the Indian market is about five years behind China, it looks like democracy renders India a better place for entrepreneurship in a long run.

  • The markets for mobile and social networking are definitely hot spots for VIC startups. E-commerce and Clean tech industries should also fare well.

  • VIC startups tend to follow a similar product/service development pattern: copy/imitation, then innovation or adaptation, then adjustment to the local market.

  • Government involvement has been most strongly observed in the funding of Chinese startups.

  • Government “censorship" of content, such as that retrievable on Google, is more of an issue for U.S. companies going to China than for "home-grown" Chinese companies.

  • On education, both China and India are somewhat following the Silicon Valley model to nurture geographically focused "tech hot spots" for future entrepreneurs.

  • Where past trends were for international students to come for studies in the United States and then start up a company in Silicon Valley, now the tides have turned: Many students do come to study in the U.S., but then take their knowledge and experience back home to start businesses in their countries of origin.

  • In the past five years, there has also been a significant increase in "home-grown" Chinese or Indian entrepreneurs who never go overseas and are able to adapt business models that fit precisely into their markets.