Innovation Survey of the Greater Shanghai Region: In a Maturing Market, Innovation a Top Priority for German Businesses in China

25.10.17 AHK China - News-Hauptkategorie, Market Information, Chamber

Shanghai, 25th October 2017 – German companies in East China consider innovation as the key growth driver for their business activities. In order to keep up with rising competition, German companies are expected to shift from product to business model innovation within the next three years. Currently, human resources and IP concerns are the main barriers to innovation. This year’s Innovation Survey was conducted between February and March 2017 by the German Chamber of Commerce in China | Shanghai in partnership with Tongji University and goetzpartners Management Consultants among German manufacturing companies in the Yangtse Delta, 111 valid responses were collected.

Innovation a top priority and growth driver for German companies

Within the next three years, over 80% of surveyed companies expect an increase in their innovation output. 67% of German manufacturing companies in China see Innovation as one of the top three priorities for their business activities in the Chinese market. Meeting customer needs, differentiating from competitors, as well as attracting new customers are the main reasons for enhanced innovation activities. However, only 41% of companies have a well-defined innovation strategy.

Besides human resources, IP concerns are among the main barriers to innovation

Human resources (59%) and IP concerns (46%) were identified as the top two barriers to innovation among surveyed companies. The protection of intellectual property (IP) rights is the second most important concern, and impacts how German companies are tapping into local know-how: While almost half of surveyed companies could imagine acquiring a local company to drive innovation, merging is a less attractive option, potentially due to the legal uncertainty surrounding unwanted technology transfers.

Inspired by the Chinese model, German companies shift from product to business model innovation

The increasingly more innovative Chinese approach to business has led to a transformation of China’s competition strategy – rather than competing on costs, Chinese companies are disrupting markets by focusing their efforts on business model innovation. This trend impacts German Companies in China: Within the next three years, companies are expected to shift from product to business model innovation. While most companies still limit their R&D activities in China to Global-to-Local / Local-to-Local innovation, Local-to-Global innovation could be the next strategic priority for companies - a quarter of companies already engages in relevant research. In order to drive innovation further, significantly more firms intend to collaborate with start-ups and competitors over the next three years.

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