Innovation instead of imitation has become the policy of Chinese companies, with even young Chinese organisations rushing to file patents for their ideas and products.
Economists from Technische Universität München (TUM) and the Munich Innovation Group have analysed the patent portfolios and internationalisation strategies of nearly 80 Chinese companies. The main results show that, following in the wake of telecommunications and IT companies, other industries are now heavily investing in their own intellectual property.
Even young firms are protecting their intellectual property rights on a massive scale in Europe and the US – and yet they are barely known there.
For example, telecommunications company Huawei has set up its European R&D headquarters in Munich and seeks to employ engineers from Munich’s universities. The automotive enterprise BYD has filed hundreds of intellectual property rights in Western countries. Chang’an is aggressively internationalising its business in Russia, Brazil and African countries.
“For a long time, Chinese companies had a reputation for simply imitating their Western competitors. But the number of patent applications filed by them has increased heavily in recent years,” says Dr Philipp Sandner of TUM’s chair for Strategy and Organisation. “China has a large number of up-and-coming companies that are pursuing an aggressive internationalisation strategy – but some of these companies are still barely known in Europe or the US.”
Researchers from TUM and analysts at Munich Innovation Group investigated 77 Chinese companies with high potential in innovation, internationalisation and growth. They concentrated on the key industries automotive, chemicals & pharmaceuticals, electronics, IT & Internet, engineering, solar, telecommunications, and oil & steel.
The economists analysed mainly the companies’ patent portfolios, enabling them to draw inferences about their general development and their internationalisation strategy. For example, by studying the geographical distribution of patent applications, the researchers could conclude which are the firms’ target markets.
One conclusion the research team arrived at is that the imitation strategy of Chinese companies is on a downturn. For most of them, self-developed intellectual property plays an increasingly dominant role in their businesses.
Telecommunications companies like Huawei are pioneers, and their patent activities have now stabilised at a high level. For other industries like energy, chemicals and pharmaceuticals the analyses indicate a strong rise in innovative activity.
The majority of Chinese companies are still primarily operating in their domestic market, including some companies with very high growth rates. But the number of distributed patent applications in Europe and North America over the last years illustrates the growing importance of these markets.
According to the European Patent Office (EPO), Chinese organisations filed more than 18 000 applications for European patents in 2012. This means that China represents 7,3% of all European patent applications in 2012, ranking fourth after the US (24,6%), Japan (20,1%) and Germany (13,3%).
One element in the strategy of Chinese companies that represents a challenge for European and North American economies is the fact that Chinese firms are filing a relatively large number of applications for utility models compared to Western businesses.
Being in worldwide IP registers, these intellectual property rights can protect a product in manifold configurations. As such, Chinese firms are securing a great deal of scope for themselves for future product developments, whereas other companies could be seriously blocked in this regard.
