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Run of the Red Queen This page intentionally left blank Run of the Red Queen Government, Innovation, Globalization, and Economic Growth in China Dan Breznitz Michael Murphree NEW HAVEN AND LONDON Published with assistance from the foundation established in memory of Philip Hamilton McMillan of the Class of 1894, Yale College. Copyright © 2011 by Dan Breznitz and Michael Murphree. All rights reserved. This book may not be reproduced, in whole or in part, including illustrations, in any form (beyond that copying permitted by Sections 107 and 108 of the U.S. Copyright Law and except by reviewers for the public press), without written permission from the publishers. Yale University Press books may be purchased in quantity for educational, business, or promotional use. For information, please e-mail [email protected] (U.S. office) or [email protected] (U.K. office). Set in Adobe Garamond type by The Composing Room of Michigan, Inc. Printed in the United States of America. Library of Congress Cataloging-in-Publication Data Breznitz, Dan. Run of the red queen : government, innovation, globalization, and economic growth in China / Dan Breznitz, Michael Murphree. p. cm. Includes bibliographical references and index. ISBN 978-0-300-15271-5 (cloth : alk. paper) 1. China—Economic policy. 2. Industrial policy—China. 3. Technological innovations—China. 4. New products—China. 5. Economic development— China. I. Murphree, Michael, 1981– II. Title. HC427.95.B748 2011 338.951—dc22 2010036483 A catalogue record for this book is available from the British Library. This paper meets the requirements of ANSI/NISO Z39.48–1992 (Permanence of Paper). 10987654321 To Shiri, Mika, and Tom, for reminding me every day, and every minute oftheday,why And to the memory of Hatuli, who in his last days sat with us as we wrote the very first draft of this book —DB To Nana, for making my life a joy And to Danny, for teaching me how to write and giving me this chance —MM This page intentionally left blank Contents Acknowledgments, ix List of Abbreviations, xiii Introduction: An Invention of My Own, 1 1 The White Knight Avoided: Economic Reforms and Innovation for Growth in China, 10 2 Rules of the Run: The Politics of China’s Institutions of Innovation, 35 3 Beijing, 86 4 Shanghai, 126 5 Shenzhen and the Pearl River Delta, 160 Conclusion: The Meaning of the Run: China and the New Realities of Global Production, 195 Notes, 207 References, 238 Index, 265 vii This page intentionally left blank Acknowledgments This book is based on extensive and extended fieldwork. Therefore, it is not possible to thank all those who appeared at just the right mo- ments to help with our field travels, data analysis, drafting, and the seemingly endless agonizing process of rewriting and revising (books, it should be said, are not written—they are rewritten and revised many more times than we care to admit). Nonetheless, a few indi- viduals have given us extensive help, and without them, none of this would have been possible. In China, first and foremost we thank Shanghai Jiaotong Univer- sity and the School of International and Public Affairs for their sup- port, partnership, and guidance throughout this project. Without their help as early as April 2007, this project would have never gotten off the ground. Frank Tan of the Zhongguancun Representative Of- fice in Silicon Valley helped with initial contacts before the project even officially began. Special thanks are also due to the People’s Gov- ernment of Dongguan, the People’s Government of Shenzhen, and the Zhongguancun Administrative Committee. Their openness and candor, assistance in arranging site visits and interviews, and great ix x Acknowledgments willingness to tell us flatly when we were wrong are greatly appreciated. We are deeply grateful to all of the following: the Chinese Academy of Sciences; Pro- fessor Otto C. C. Lin, for many hours of discussions and help in the field; Hong Kong University of Science and Technology; Beijing University of Posts and Telecommunications; Professor John C. Chiang, of Beijing University, and recently of USITO (the U.S. Information Technology Office), for sharing his almost limitless, deep knowledge of the history of the Chinese IT industry; Dean Weiying Zhang, of the Guanghua School of Management at Beijing Uni- versity; Dr. Patrick Keating, of Cisco Systems; the Georgia Tech China Alumni Network; and the American Chamber of Commerce in Shanghai, for its hos- pitality, assistance, feedback, and mentorship in the field. Above all else, we are forever in debt to the entrepreneurs, officials, execu- tives, employees, and academics who so generously gave of their time to speak with us. We hope our research can be as advantageous and profitable for you as interviewing you has been for us. We deeply thank you. For all their assistance, company, and good eats in China, we thank Nancy Chen, Huang Ming, Huang Qi, Robert Liu, Liu Xielin, Sheng Huanye, Ye Jiang, Yan Maosi, Zhang Aihua, Zhang Wei, and John Zhu. For their help with the long interviews and the longer process of transcribing and translating, we greatly appreciate the services of Philip Hu, Liu Bo, Irainy Liu, Ren Xiaopeng, Tan Yan, and Endymion Zhuang. Field research can be a lonely process, and their company was greatly appreciated. To the taxi drivers, wait staff, and hotel floor managers whose sense of humor, openness, generosity of spirit, and free offer of good conversation made our long trips possible in more ways than one, we are forever grateful. In Atlanta, special thanks to Siwan Cillian Liu for her endless patience, hard work, and assistance with analysis, translation, GIS (ge- ographic information system) mastery, and graphics. And of course, we thank Hua Jiao for everything. For support on the second home front, many laughs, and great memories, special thanks to the faculty and staff of the Interlingua School in Guiyang and Zunyi. They forever have a special place in Michael’s heart for enabling and then showing him how wonderful it is to live in China. The arguments of this book were extensively improved thanks to the work of many. We thank all the participants in the inaugural meeting of the Kauffman Foundation International Innovation and Entrepreneurship Scholars Network in April 2008 in Atlanta as well as those at the Harvard Business School Inter- national Research Conference in May 2009, in particular Jordan Siegel. Special thanks should be given to our former hosts and good friends at Stanford Uni- Acknowledgments xi versity, especially to Henry S. Rowen, William F. Miller, Marguerite Gong Han- cock, Rafiq Dossani, and George Krompacky of the Stanford Project on Regions of Innovation and Entrepreneurship (SPRIE). Many people gave us extensive comments on drafts of the text at various stages of our work, including William J. Long, Adam Segal, Minyuan Zhao, Andrea Herrmann, Scott Kennedy, Suzanne Berger, Dick Samuels, Barry Naughton, Susan Walcott, Martin Kenney, Fei- Ling Wang, John Garver, Doug Fuller, Mark Zachary Taylor, Edward Steinfeld, Adam Stulberg, and John Zysman, all of whom not only went far beyond the call of duty, but also made sure that even when we thought we could not move the argument forward anymore, we did. We would also like to thank our many beloved teachers, friends, and mentors along the way, from Ehud Harari, who was the first to open our eyes to the importance of comparative political econ- omy, to our colleagues and teachers at the Georgia Institute of Technology, MIT, and elsewhere. The influence of many discussions we had with Amos Zehavi, Gerald McDermott, Carsten Zimmermann, Andrew Schrank, Woody Powell, Jason Owen-Smith, Richard Doner, John Walsh, Crystal Chang, and Frank Giarratani appears in every page of the book. Danny would also like to thank the following: Suzanne, for introducing him to the painful joy of book writing; Dick, for showing him the model and giving a personal example; Mike, for remind- ing him why it is important to be a social scientist; the faculty of the Sam Nunn School, for allowing and helping him to write, be agonized, and be joyful; and John, who might find it strange to be thanked for keeping him sane. In the initial editing, both Marilyn Levine and Deborah Chasman made sure that our book could be read by people other than our close family. At Yale University Press, we would like to thank our editor, Michael O’Malley, for his enthusiasm and immense help; Alex Larson and Niamh Cunningham, for keeping the project on track; and Margaret Otzel for superbly managing the ed- iting of the manuscript; thanks also to Kip Keller, a master wordsmith, for working his copyediting magic, and Marcia Carlson for superb indexing. The research for this book was made possible by generous grants from the Kauffman and Sloan foundations; as befitting such foundations, their help went further than just granting us funds. For that, we are deeply in debt to their personnel, especially Gail Pesyna at the Sloan Foundation and Robert Strom, Lesa Mitchell, Robert Litan, Dave Kaiser, and Glory Olson at the Kauff- man Foundation. At the Georgia Institute of Technology Sam Nunn School of International Affairs, Wanda Moore, Marilu Suarez, Angela Levin, Benjamin Powell, and Vince Pedicino made sure not only that we could do our work, but also that we did not go crazy along the way. xii Acknowledgments The ups and downs of book writing were shared not only by the authors, but also by their families, in an unfair exchange. We got both pain and joy, while our families mostly got just the pain. Michael would therefore like to thank his family for their support, love, and understanding in all of his endless wander- ings.

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