Essay: Business Innovation and Enterprise

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[. . .] 3. Industries with innovative potential

As it has been mentioned throughout the previous section, the Chinese economy and business sector are characterized by a wide array of elements which both promote as well as stifle innovation and research and development. Some of the shortages, such as the protection of property rights, are being addressed and would be gradually transformed into items promoting innovation rather than discouraging it. Nonetheless, it has to be recognized that the country is faced with numerous challenges to innovation and that most of these challenges are pegged to the emergent nature of the country, its economy and its industry sectors.

In spite of the shortages identified, there are some specific industries in the Asian country which do stand increased chances of supporting innovation. These refer to the following:

Technology

Entertainment and cultural innovation

Environmental field

The technological sector is, by far, the field most likely to stimulate innovation. And China has already commenced to create new technologies. Specifically, while it is often accepted that the Chinese technology workers are centered on replicating the innovations within the global community, the recent years have witnessed impressive innovations in the Chinese technology sector, such as those pointed out by Ashton (2010).

The entertainment sector is often linked to the technological one, through the development of items such as tablets of smart phones which increase the quality of the leisure time. And aside from the technological gadgets, the entrainment industry in China would also further develop in terms of cultural innovation, through elements such as amusement parks, design parks or art villages, which are becoming more and more popular across the country (Chang-Rong and Fu-Yu, 2011). This sector is as such also revealing high potential for future developments and innovation.

Finally, the last sector perceived as having a high potential for innovation is represented by the environmental field. China is faced with a multitude of environmental issues, such as urban pollution or deforestation. But the Chinese technical workers and the managerial workers have committed to developing new solutions which promote environmental responsibility. This would become obvious in terms of both technologic innovation, as well as other measures to promote responsibility, such as education or changing business practices. The innovative potential of the environmentally responsible sector is stimulated from both within the domestic sector as well as the global community (Organization for Economic Co-operation and Development, 2008).

4. Conclusions and recommendations

China is currently the world's third largest economy, preceded only by the European Union and the United States of America. Still, China remains an emergent economy and has an increased potential to improve its economic conditions in the future.

But like any other emergent economy, the country reveals a series of shortages which discourage foreign investments. One specific aspect in this sense is represented by the approach to innovation.

The reforms implemented three decades ago are still ongoing and they focus on liberalizing China and strengthening its international position. Nonetheless, they have so far been insufficient in dealing with all the problems and China continues to face issues which discourage innovation. These for instance include the lack of specialized workers in research and development, poor intellectual property rights protection, or still increased intervention of the state. In order for investors to be better attracted, it is necessary for the state to remedy these problems. Or for the time being, it is necessary for the investors to devise specific strategies which protect them against the peculiarities of the national innovation system.

Aside from the shortages in the approach to innovation, China also reveals some notable benefits, such as cost efficiencies and increased capitals, flexible and disciplined workforce or continued technologic developments and commitments. While these are still insufficient to ensure investors' success in China, they do represent evidence that the country is developing, it reaching its potential and is able to further develop. In this setting then, it is recommended for investments to be made in China as these would generate gains, as well as support innovation in the country. This recommendation is based on the future development of China, but is accompanied by the need for investors to devise strategies which best answer to these challenges. In this order of ideas, some suggestions as to how investors could maximize their investments and support innovation include the following:

Use mechanisms of market protection to the highest possible extent as the stock prices in China are highly volatile. Prudence should be the main concern in any investments.

Collect information from reliable sources only and recheck the data retrieved. It is even recommended for the potential investors to contract the services of local consultants in order to best identify all legal, commercial, cultural and other traits important for the business venture; it is also necessary to conduct extensive research on the selected business partners. This step is necessary as the business operations in China still lack transparency.

Diversify the investment portfolio in order to not depend on a single firm or industry in China, but to minimize the risks of losses.

Remain highly alert to all changes impacting the Chinese economy and marketplace, including the new laws issued by the government. China is still developing its political system to fit the new global context and the current state of the economy and investors are sensitive to changing legislations. This recommendation is applicable when investing in both the public, as well as the private sector in China. "Even when investing in private Chinese companies you need to take politics into account. A sudden morality campaign by the government might mean shutting down things like micro-blogging sites without warning, or imposing limits on online gaming (gaming addiction among youngsters is increasingly being viewed as a serious social problem). That would hurt the stock prices of online game companies like Netease, Shanda and Sohu" (Rein, 2010).

For learning and accommodation purposes, investors should consider indirect investments in China. These would be materialized in the purchase of stocks in companies which trade with China or which interact with the country at deeper levels. Throughout this period, the investors would be able to observe the sensitivity of the Chinese market, its reactions and its potential, and the investor would be able to identify risks which interest them and consider potential solutions.

In case of direct investments, it is recommended that the foreign investors emphasize on prospective partners which follow these specific trends: the preference of Chinese people to travel, the increasing purchase power of women and the fact that the future economic growth is not linked to the megacities of Shanghai and Beijing, but to less economically known cities such as Hefei, Dalian and Chenhdu (Rein, 2010).

The Asian country is still developing and emerging and its full potential is still unknown, but believed to be impressive. Economic agents investing in the country would be able to capitalize on their investments for the decades to come and they would also be able to further stimulate innovation. Still, they must first ensure that they respond to the challenges presented by the domestic market. In other words, similar to any other investment situation, the recommendation is that of prudence and adaptation to the features of the local community and marketplace.

References:

Ashton, A., 2010, 7 technologies where China has the U.S. beat, GreenBiz, http://www.greenbiz.com/blog/2010/12/07/7-technologies-where-china-has-us-beat last accessed on November 8, 2011

Chang-Rong, K., Fu-Yu, L., 2011, Cultural innovation industry exports talent to China, Want China Times, http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1504&MainCatID=15&id=20110207000010 last accessed on November 8, 2011

Li, W., 2011, Applying Grey relational analysis to evaluate the factors affecting innovation capability: evidence from Chinese high-tech industries, Canadian Social Science, Vol. 7, No. 3

Lin, C.Y., 2007, Factors affecting innovation in logistics technologies for logistics service providers in China, Journal of Technology Management in China, Vol. 2, No. 1

Park, A., Cai, F., Du, Y., Can China meet its employment challenges, University of Oxford, http://www.economics.ox.ac.uk/members/albert.park/papers/employ.pdf last accessed on November 8, 2011

Rein, S., 2010, How to invest in China, Forbes, http://www.forbes.com/2010/07/20/china-investing-personal-finance-leadership-managing-rein.html last accessed on November 8, 2011

2002, China in the world economy: the domestic policy challenges, Organization for Economic Co-operation and Development, OECD Publishing, ISBN 9264196277

2008, China: encouraging responsible business conduct, Organization for Economic co-operation and development, OECD… [END OF PREVIEW]

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