This report looks at the opportunity for UK small high-tech businesses to harness China’s growing innovation capabilities to help them scale their business and succeed in the global market.

Key Findings

We examined in depth five examples of UK high tech innovative businesses who have sought to ‘harness China’s commercialisation engine’; that is, they have been drawing on a growing range of Chinese innovation capabilities to help them scale their technology and succeed in both Chinese and global markets.

We find that:

• Despite the acknowledged risks, some innovative UK small businesses have been able to create successful innovation partnerships with China.
• The firms are harnessing Chinese innovation capabilities not primarily around research and development, but in prototyping, exploiting sunk innovation capital, accessing high-level science and engineering talent, providing proof-of-concept for technology, scaling an innovation, and user testing in the consumer market.
• Smaller firms are likely to need to focus entirely on China as an innovation partner, as the senior resource required to make the partnership work means it needs the company to be focused on the Chinese opportunity.
• Firms need to pick a partnership model that allows them to access the key Chinese innovation capability they need, but remain flexible as the partnership develops, because the markets are moving so fast in China.
• Firms need to be cautious around intellectual property, seeking a pragmatic solution which avoids the need to enforce IP rights.

Policy Recommendations

• BIS should explicitly broaden the current focus of policy support to include all the stages of the commercialisation of innovation process: basic and applied research, proof-of-concept, piloting, scale-up, and Chinese or global market rollout, with greater emphasis on the latter stages where many of the largest economic benefits are to be gained.
• UKTI, BIS and the China Britain Business Council should all target policy toward addressing the most significant barriers that stand in the way of SMEs harnessing China’s commercialisation engine: high search costs of finding suitable partners, difficulties in accessing existing pools of knowledge about how best to set up collaboration with China, and managing potential risks of intellectual property leakage.
• BIS, UKTI, with the support of the Foreign Office through the Prosperity Funds, should develop a more conscious strategy linking public support for innovation collaboration within the UK (e.g. investment tax incentives, EU funds, soft-landing incubators), between countries (e.g. trade missions, workshops, exchange programmes and visa conditions) and in China (policy influence, diplomatic and political support).
• BIS and other funding agencies, including regional government, should continue to experiment with – but also improve the evaluation of – support for intermediaries (including science parks, incubators, venture and angel networks, online match-making platforms, and integrated sectoral initiatives – such as the Lancaster University China Catalyst Programme) as a route to cost-effective support for innovation collaboration.
• The Chinese and UK governments should work together to improve the access to, and quality of, knowledge on how to effectively collaborate with China on innovation, to help reduce the upfront costs for small firms. This could include stronger case studies, clearer signposting of the multiple routes for support, the establishing of relevant ‘advisory panels’ on key issues, and the promotion of strong examples of collaboration, including the lessons learned from less-successful experiences.

Authors

Benjamin Reid, Peter Williamson, Kirsten Bound