by BHIM BHURTEL
Back issues of the Harvard Business Review show how the Americans got it wrong
When management pundits in the Harvard Business Review first asked whether China could innovate, most saw a nation condemned to mere imitation of the West. From “China Is Not About to Out-Innovate the US” (2010) to “Why China Can’t Innovate” (2014), Western commentators framed innovation as a cultural or institutional product – something that could thrive only in free market economies, strong intellectual property regimes, liberal democracies, and political pluralism.
Two decades later, China’s ascent in electric vehicles, drones, 5G, high-storage batteries and artificial intelligence makes those assumptions look poorly postulated.
The irony is deep: The country that many thought was too state-controlled and authoritarian to foster innovation has become the world’s fastest innovator – not because it imitated Silicon Valley, but because it changed the way innovation is done.
The West’s critics of Chinese innovations were holding erroneous opinions.
The state as architect of, not a constraint on, innovations
Western management theories view the government as a market regulator, while Chinese practice views it as an ecosystem builder and an innovation enabler. The 2010 Harvard article claimed that government involvement always stifles creativity. But China’s most dynamic industries such as clean energy, electric vehicles and telecom infrastructure grew not despite state coordination but because of it.
The Industrial and Commercial Bank of China (ICBC), the State Council’s National Development and Reform Commission and local innovation zones are all mission-driven state institutions that don’t care about making a profit every quarter in companies’ financial statements. They want their country to be able to make all of its own technology.
This difference is very important. In the United States, innovation is rewarded only when it meets the needs of capital markets, not the product market. In China, it is supported when it fits with the country’s development strategy. When the Chinese government supports batteries, AI chips, or green technology, it does more than give money. It also buys products, sets standards and ensures that people have the right skills. So innovation is built into the environment and the infrastructure.
Critics (see HBR’s 2016 “How China’s Government Helps — and Hinders — Innovation”) recognized this duality but failed to see the asymmetry: The “help” is much stronger than the “hindrance.” Bureaucracy may slow experimentation at the edges, but scale, coordination, and patience have enabled entire industries to leapfrog several generations of technology.
China had plans to gain a competitive edge. This article drew on Ronald Reagan’s main idea from a January 20, 1981, speech: “In this present crisis, government is not the solution to our problem; government is the problem.” However, in China, the government is seen as the solution.
Manufacturing as innovation’s core, not its afterthought
For decades, Americans have equated innovation with invention – new patents, breakthrough science, disruptive ideas. China equates it with industry execution. Even as HBR’s 2010 cohort of writers lamented that China lacked “original breakthroughs,” Chinese firms were transforming production into an innovation engine.
Manufacturing is not just copying; it is an original lab. Every production line is a learning system that continually improves design tolerances, energy efficiency, logistics, supply chain management and cost efficiency. In this setting, new tools, processes, and business models work together. This is how BYD improved its blade battery, DJI improved drone stabilization, and CATL developed new modular EV power systems – all through cycles of scaled iteration that Silicon Valley could barely prototype.
America’s lack of interest in manufacturing has secluded design from delivery. American companies are great at coming up with new ideas, but they struggle to turn those ideas into final consumable products. China’s ongoing control over the “means of making” creates a rich information feedback loop for companies, with engineers, suppliers, and production managers working together and trying new things all the time. That’s how the speed of innovation builds on itself.
The HBR essays that used Nobel Prizes or R&D ratios to measure innovation could never see this process dimension. Learning by doing and learning by making things are two types of industrial learning that don’t show up on balance sheets but are very important in technological races.
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