returned, the World Bank began its massive support for China's educational system, .... The second data set was funded by the Hang Lung Center, HKUST, and.
Reverse Migration and Technology: The Case of China
David Zweig Chair Professor, Division of Social Science and Director, Center on China’s Transnational Relations Hong Kong University of Science and Technology
Wilfried Vanhonacker Chair Professor and Head, Department of Marketing, Hong Kong University of Science and Technology
and
Dr. Chung Siu Fung Director, John Cathedral HIV Education Centre in Hong Kong
Paper prepared for the Conference on “People on the Move: The Transnational Flow of Chinese Human Capital,” Center on China’s Transnational Relations, Hong Kong University of Science and Technology, Hong Kong, October 21-22, 2005.
1
Introduction The international migration of highly skilled workers is on the rise. 1 With that movement comes the globalization of technology, whereby the highly skilled, to increase their own value, bring their skills, information, and technology with them to their new country. Many observers worry that the flow of the highly skilled by and large moves technological skills from the developing to the developed world, creating a brain drain that robs the developing world of its own talent. More recently, reverse migration has become an important component of the highly skilled migration which brings human capital back to the original sending country. Taiwan, South Korea, and India have all benefited enormously from this trend and show that mobilizing migrants to return from overseas can play an important role in the country’s economic development. 2 How do we explain this process of reverse migration? Neo-classical economics views reverse migration as “the outcome of a failed migration experience which did not yield the expected benefits.” 3 According to Bjoras and Bratsberg, the skills or the enhanced human capital received overseas must be particularly useful in the original source country if it leads people to return to their country of origin. Otherwise they would stay in their new country. 4 In fact, the new economics of labour migration (NELM) sees return migration as the logical outcome of a “calculated strategy,” where migrants accumulate savings and develop skills that can be used in their home country. Similarly, one of Cerase’s four types of migrants focus on “return and
1
Research assistance for this paper was provided by Vivian Lam, Dept. of Marketing, HKUST. Shirley L. Chang, "Causes of Brain Drain and Solutions: The Taiwan Experience," Studies in Comparative International Development, vol. 7, no. 1 (Spring 1992): 27-43. 3 Jean-Pierre Cassarino, “Theorising Return Migration: The Conceptual Approach to Return Migrants Revisited,” International Journal on Multicultural Societies, vol. 6, no. 2 (2004): 255. 4 G. Borjas and B. Bratsberg, “Who Leaves: The Outmigration of the Foreign-born,” Review of Economics and Statistics, vol. 78, no. 1 (1996): 165-176. 2
2 immigration,” where people use their new skills acquired abroad to achieve goals in their country of origin. 5 States that want to attract people back, however, must make significant investments in innovation and research infrastructure, so the opportunities and facilities in the host country are not decisive in keeping the overseas sojourner from returning home. According to Savaria and Miranda, “when real opportunity exists within the context of coherent internal policies and investments in science and technology, returning to the home country becomes an attractive option for emigrants.” 6 Just as host countries and their governments must coordinate science and innovation policies with migration policies to attract overseas talent, sending countries must “develop an adequate scientific, technological and business environment that will provide rewarding opportunities for the return of individuals who have upgraded their skills abroad.” 7 So, if a state wants its citizens to bring back technology, it must give them incentives to do so, including psychological and financial rewards What kind of skills are valuable to bring back? According to the perspective put forward by Bjoras and Bratsberg, people overseas should learn law, business management, and particularly, science and technology, which, in a China bent on raising its position in the product cycle, should enhance income opportunities. 8 Thus, this paper argues that China’s central government, local governments, universities and research laboratories, and especially China’s growing private market, all reward people who return with technology, and as a result, many of the current round of returned migrants are bringing with them world class technology that they believe will enhance their positions within China’s universities, research institutes and marketplace. In fact, I would go so far as to say that
5
F. P. Cerase, “Expectations and reality: a case study of return migration from the United States to Southern Italy, “International Migration Review, vol. 8, no. 2 (1974): 245-62. 6 Nancy Gore Saravia and Juan Francisco Miranda, “Plumbing the brain drain,” Bulletin of the World Health Organization, no. 82 (2004): 608-615. 7 OECD Observer, “International Mobility of the Highly Skilled,” Policy Brief (July 2002): 6. 8 Borjas and Bratsberg, “Who Leaves: The Outmigration of the Foreign-born.”
3 technology is a critical force making people into reverse migrants (or “astronauts”), as the rewards to those who bring back technology are quite significant. No doubt, as one moves from universities to research institutes to returnee entrepreneurs, the significance of technology as a motivation for returning, or as a conscious component of “resource mobilization “and “preparation for returning,” increases dramatically. Moreover, while early on, the key incentives came from public institutions—the government, its universities and its labs—today the marketplace plays the key role encouraging returnees and promoting the transfer of technology, particularly technologies that can be commercialized. Gaining Western technology has been central to the leadership’s attitudes towards education and economic development. 9 When Deng Xiaoping called on China to open its doors to the outside world, his goal was to gain management skills, new scientific and technological information, and foreign capital from the West. 10 As he stated, “the managerial skills of the capitalist countries, particularly various methods of developing science and technology—are part of mankind’s common heritage.” Thus Deng strongly supported sending Chinese scientists overseas, in the belief that they would ultimately return. Soon after reform advisor Huang Xiang showed Zhao Ziyang that China had fallen far behind the West in terms of technology, the reformers instituted the 1984-85 reforms in education, which decentralized the control over sending students overseas to the universities themselves. 11 Following these reforms, the number of graduate students going abroad to study increased dramatically. Several years later, in 1988, when the central leadership discovered that most students who were going overseas were not returning, the Ministry of Education advocated closing down the open door in education. However, the State Science and Technology 9
Erik Baark, “China needs software not hardware,” South China Morning Post, October 1 2002, and “The Chinese Quest for Advanced Technology,” unpublished paper, 1999. 10 Deng Xiaoping, “Why China has opened its doors,” Bangkok Post, 10 February 1980, p. 5, in Foreign Broadcast Information Service, China, 12 February 1980, pp. L1-L5 11 Carol Lee Hamrin, China and the Challenge of the Future (Boulder, CO: Westview Press, 1990).
4 Commission STC argued early on that by allowing people to stay abroad, China would be better able to gain access to Western technology. 12 Jiang Zemin’s slogan of “ke jiao xing guo”— “strengthening the country through science and education”—and his acceptance of globalization kept the focus on imported technology, and today many returnees argue that while Deng gave them the freedom to go abroad, Jiang created the incentives and appropriate environment for them to contemplate returning. Only with the most recent 5th Plenum of the 16th CCP has the state begun to emphasize the need for promoting an indigenous technological capability in order to avoid overseas dependence.
Shortage and Technology Transfer This paper argues that people who return, particularly scientists and entrepreneurs, are attracted back in part because they possess some technology, research methodology, software or information that is in short supply in China and which grants them “extra-normal profits” in China’s domestic marketplace. In some cases, this strategy may be conscious, in that people go overseas to gain knowledge that will enhance their opportunities in China. In other cases, they may have been working abroad, with no major plans to return, but when opportunities in China began to surpass those available overseas, these people sought out new technologies that were in short supply within China in order to take advantage of China’s booming economy. Or they may have created a new technology overseas, either in their own company or while working for someone else, and then decided to bring it back to China because they believed that it would be profitable there. One group that would be particularly “opportunistic” would be those who returned with a technology that was not necessarily the newest international technology, but was only new for China. This result would suggest that the returnee had adopted a conscious strategy of finding
12
Xu Lin, “Lecture to the Boston Fairbank Center,” December 10, 1989.
5 which technologies were in short supply in China and then brought them back so as to earn the large profits that are available in a non-competitive situation. Similarly, if the returnee had developed a skill that was in short supply in China, they were in a strong position to advance their career. As we will see below, the data on the returned entrepreneurs tends to confirm these two hypotheses. The mode in which they bring it back may vary as well. In some cases, the entrepreneur or inventor may return to China and join a research institute. Or he may set up a company, often in the incubators in high tech parks that dot all of China’s major cities. In other cases, he or she may straddle the Pacific by setting up a company in China, yet maintaining an overseas residence. Another important way technology is transferred in East Asia is through embedded social networks which are established when someone returns to their home country, while friends stay in the host country. 13
Efforts of the Central Government Besides establishing broad policy directions that encouraged the promotion of S&T, China’s leaders introduced specific policies that link returnees and technology. In the late 1980s, the Central government, under its Torch Plan, established new High Tech Development Zones (HTDZs) in cities around China. 14 By 1991, there were 27 such parks, and by 1997, there were 52 parks. These zones usually established special incubators for returnees, where they could be protected from the vicissitudes of China’s bureaucracy until their firms were ripe; but the projects had to involve new technology if they were to receive special privileges, and the local S&T Bureau was responsible for approving such projects.
13
Jinn-Yuh Hsu and AnnaLee Saxenian, “The limits of guanxi capitalism: Transnational collaboration between Taiwan and the USA,” Environment and Planning A, vol. 32 (2000): 19912005. 14 On these high tech development zones, see Jon Sigurdson, “A New Technological Landscape in China,” China Perspectives, no. 42 (July-August 2002): 37-53.
6 Central organizations, such as the Ministry of Education, the Chinese Academy of Sciences (CAS), the National Natural Science Foundation, the Ministry of Personnel, the Ministry of Finance, and the Ministry of Science and Technology, have all worked together to introduce a series of special programs and fellowships in the sciences and for universities to encourage people with talent to return to China. These include the Cheung Kong Fellowship, the Bairen jihua (Hundred Talents Program), Seed Fund for Returned Overseas Scholars, CrossCentury Outstanding Personnel Training Program, the National Science Fund for Distinguished Young Scholars, and the “One Hundred, One Thousand, and Ten Thousands Program.” 15 In most cases, the returnee needs some new idea or technology to win such an award, though some argue that the quality of returnees under CAS’ “Hundred Talents Program” has been declining. As we will see below, some winners of this award did not have a new technology even for China.
Efforts of the Local Governments Beginning in 1989, soon after the Tiananmen crackdown, Shenzhen officials began to encourage overseas scholars to return and live in their city. Thereafter, serious competition emerged among cities, particularly those along the coast, who offered returnees special incentives to come and live in their city. 16 Cities also rewarded people for bringing back new technology. For example, guidelines published by the city of Weihai, on the coast of Shandong Province, specified that if the technology that returnees brought back to China generated major economic or social benefits, their home unit was encouraged to give the returnee a large bonus. 17
15
Cong Cao, “China’s Efforts at Turning ‘Brain Drain’ into ‘Brain Gain,’ East Asian Institute Background Brief, No. 216, November 2004. 16 For a more detailed discussion of the role of different levels of government, see David Zweig, “Learning to Compete: China’s Efforts to Encourage a Reverse Brain Drain,” International Labour Review (January 2006). 17 See “Weihai shi xiyin liuxue renyuan youhui zhengce,” October 1992 (Weihai city government’s preferential policies for attracting overseas scholars), in Liuxue huiguo gongzuo wenjian huibian (A Collection of Articles on Work Relating to Overseas Studies and Returnees; Beijing: Ministry of Education, 2003), p. 40.
7 The Guangzhou Fair that occurs at the end of December each year reflects a major effort by local governments to draw on the scholars overseas and attract technology back to China. 18 Begun by the city of Guangzhou in the late 1990s, the goal of the fair is to encourage researchers who remain overseas to bring back their own technological breakthroughs or “xiangmu” (projects) to China and to link those projects with domestic firms or high tech zones that are willing to work with them. Some high tech zones and the Returnees’ Services Centres (Huiguo renyuan fuqu zhongxin) in most of China’s major cities attend the fair, hoping to attract overseas projects or overseas scholars to link with their city. The research parks themselves actively try to attract overseas entrepreneurs. Established as semi- public companies (shiye danwei), they are often expected to establish joint ventures with start-up firms and therefore share in their profits. 19 Some firms seek partners who are still abroad, in the hope of attracting them to their zone. For example, Zhongguancun, in the northwest of Beijing, China’s first high tech zone, has established liaison departments in Silicon Valley, Tokyo, Amsterdam, Toronto, and in the Eastern part of the U.S. 20
Academics and New Methodologies In the late 1970s and early 1980s, most Chinese scientists went out as Visiting Scholars for at most two years. While such a short period of time did not allow for a total retraining of the scholars, these early “gugan” or “core” academics who had graduated from universities before the Cultural Revolution, were sent to discover what new ideas, methodologies and technologies had been developed in the West during the years when China had cut itself off. Soon after they returned, the World Bank began its massive support for China’s educational system, allowing
18
Xinhua, “Fair for returned overseas students draws wide attention,” January 2, 2003. Interview in Shenzhen’s high tech incubator, February 2003. 20 See Wang Haiming, “Come Back from Overseas! The ‘Talent Reflux’ Era Has Arrived,” published in Zhongguo daxuesheng (China Campus: March 2002), translated in Chinese Education and Society, vol. 37, no. 2 (March/April 2004): 7-11. 19
8 many of these professors to buy the same equipment that they had used during their sojourn overseas. Their combined efforts launched China’s scientific reawakening in the mid-1980s. 21 Another survey, carried out in 1997, found significant differences between people who had stayed for more than three years, and in most cases had received a foreign Ph.D., and those who had stayed for less than three years. The latter groups was composed either of Visiting Scholars or people who had received a domestic Ph.D. and then went on a post-doctoral fellowship. Overall the data suggest that those who stayed out longer transfer much more technology and were rewarded for doing so. In particular, 80 percent of “long term sojourners” were much more likely to be using the fruits of their international exchange in their teaching, as compared to 59 percent of “short-term sojourners.” 22 Long-term sojourners were also more likely to import foreign capital and technology (18%) than short-term sojourners (8%). Finally, 44% of long term sojourners, as compared to 24% of short-term sojourners, had established international collaborative projects. Yet many more of these long-termers, as compared to short-termers, believed they had been rewarded with much better housing (33% vs. 16%), more grants (65% vs. 42%) and faster promotions (48% vs. 27%) than people who had never gone overseas at all. However, when we look at the returnees we interviewed in 2001, the search for new technologies and methodologies that were unavailable in China, but by which returnees could earn “extra-normal profits,” does not seem to have played a role in bringing people back. While we found that more returnees were working in fields that were “in very short supply”--19 percent of returnees versus 9 percent of locals reported that the supply of people in their area of expertise was in short supply in China—the overall findings for the entire population of returnees and locals was not statistically significant. Nor were returnees much more likely to import technology (13 percent vs. 8 percent) than people who had remained in China—again the finding was not 21
Chen Changgui and David Zweig, "Dui wai kai feng yu Zhongguo daxue" (China's Open Policy and Chinese Universities), Gaodeng jiaoyu yanjiu (Journal of Higher Education), vol. 77, no. 1 (1998): 50-56, reprinted in Xinhua wenzai, no. 4 (1998): 158-162. 22 David Zweig, Internationalizing China: domestic interests and global linkages (Ithaca, NY: Cornell Series in Political Economy, Cornell University Press, 2002), p. 190.
9 statistically significant. Nor were they writing more teaching materials—another medium for technology transfer—as that is something locals do frequently. Still, they did make major contributions, which could justify their special privileges. First, their ability to teach new graduate courses—in essence, the opportunity afforded to them to transfer knowledge gleaned from the West—was significantly better than locals (p>.000). They had more international cooperative projects--15/109 returnees had international cooperative projects as compared to 6/90 locals. They were far more likely to be training graduate students— which involves the transfer of information (94 percent vs. 45 percent). Clearly the state has rewarded these people. Among our sample, 19 percent of locals versus 3 percent of returnees think that returnees get “much more” (duo de duo) or “somewhat more” (54 percent vs. 47 percent) research money. More locals than returnees think that returnees get promoted “much faster” (19 percent vs. 2 percent) or “somewhat faster” (62 percent vs. 44 percent). Locals also think that returnees get better housing. However, unlike studies in other countries that compare reverse migrants and locals, we did not find significant differences in reported salary levels or in the level of satisfaction with their salaries. So, the benefits are more in kind than in direct salary.
Research Scientists and “Shortage Fields” Scientists are much more involved in visible forms of technology transfer so it was much easier to get information from them that fit our inquiry. One key question was about the level of technology they had brought back. In each case, we asked whether it was (1) world quality technology, (2) not world quality but new for China, (3) new for the region of China where they worked, or (4) not new at all. Among our returnees in CAS, 17 percent of returnees (16 people), versus 5 percent of locals, reported importing international technology, of whom 9/16 were importing the “newest
10 international technology,” while another 4/16 were importing technology that was unavailable in China. Another 14 percent of returnees were bringing in foreign capital (versus 2 percent of locals), while 14 percent had translated foreign materials. Thus these scientists were clearly enhancing the S&T efforts in China. Interviews in a CAS institute in Changchun highlighted how individuals consciously promote technology transfer by seeking out “shortage fields.” One scientist described how when he went abroad, he looked for a “que men” or shortage field, believing that by mastering such a field he would increase his comparative advantage relative to researchers who did not go overseas. He believed that people had to gain a Ph.D. abroad before they could internalize a new research field and methodology and bring it back effectively to China. Going abroad for one year as a Visiting Scholar or a Postdoctoral Fellow was simply not long enough. Nevertheless, one researcher who went abroad as a post-doc learned enough to enhance his position when he returned. While in the U.S., he first searched for a hot new research topic that would help him get a “Hundred Talents Fellowship” and after he found one, he spent the next two years mastering it. His strategy succeeded as, when I interviewed him, he was back in Beijing, working in CAS, and directing a new research lab which was under construction. In fact, the decision making process for CAS’s “Hundred Talents Program” fellowship drives technology transfer. To earn the fellowship, overseas scholars must return to China and present their findings to a panel at CAS and convince this academic panel that their research is either cutting edge or likely to lead to important scientific breakthroughs. Most recipients use much of the money to set up a new research lab, often replicating the project that the scientist had been carrying out overseas. Still, the quality of recipients may not be so high as to insure the transfer of new technologies. For example, one recipient I interviewed in Beijing was setting up a new lab that was the fourth of its kind in China, but the first of its kind in Beijing. Scientists may be drawn back to China by market opportunities. In Beijing, at a CAS institute, two scientists had returned with an eye to China’s domestic market. One had developed
11 a cancer drug while working in the U.S., and believed that it would be easier to bring it to market in China. After several years back in China, he had had little success, largely because the massive amount of capital needed to develop a new drug was hard to find. Thus while he had the technology, he could not commercialize it. Another scientist in the same institute had worked for several years in the drug industry before going overseas. While abroad, he had studied how pharmaceutical firms compete globally; now back in China, he hoped to put that managerial experience to work and compete effectively in China with multinational drug companies. A survey conducted by the Chinese Academy of Sciences, which compares its returnees, to those at Beida and Qinghua, as well as a control group of researchers at CAS who had not gone overseas, shows that returnees see themselves as having carried out a significant amount of technology transfer. In particular, when asked about the influence of their time overseas on their research work, many believed they had brought in “state of the art research results,” new research methods, as well as “opening up new research fields in China.” This last point fits well with the idea of finding a shortage field .
Returnee Entrepreneurs and the Role of the Market The data for this section draws on two sets of interviews. In 2001, we interviewed 65 returnees and 80 locals in six cites, all of whom were working in high tech parks. The second data set is composed of 200 entrepreneurs, 100 returnees and 100 locals, who have set up firms in Shanghai, Beijing and Guangzhou. 23
23
The first data set was collected by Professor Chen Changgui of Zhongshan University. Stan Rosen and I, along with Professor Chen, wrote the questionnaire that was administered and raised the funds for the project. The second data set was funded by the Hang Lung Center, HKUST, and collected in collaboration with the Chinese Private Enterprise Association (Zhongguo siying qiye xiehui) and its director, Zhang Houyi. Team members on the Chinese side included Dai Jianzhong, of the Beijing Academy of Social Sciences, and Dr. Chen Guangjin, of the Chinese Academy of Social Sciences. The research was carried out in collaboration with Prof. Wilfried
12 Returned entrepreneurs are bringing back technology, as they know that it is their comparative advantage. Among those interviewed in high tech zones in our 2001 survey, 48 percent of returnees had imported a foreign technology as compared to 21 percent of locals. Another survey done in 13 incubators for returnees found that 55 percent of returnees who had set up companies there had brought along the results of independent patented technology.24 According to that report, “a large part of the overseas students that have come back to China to set up undertakings belong to enterprises that directly utilize technology and knowledge acquired abroad to enter service trades in China that were short of technology and knowledge.” 25 The group interviewed in summer 2004 demonstrated this trend even more sharply (table 1). Returnees are four times as likely as locals to possess the “latest international technology” (34 percent vs. 9 percent), and almost 50 percent as likely (46 percent vs. 30 percent) to have technology that, while not the newest internationally, is new for China. Thus while 34 percent of the returnees have a product that, given China’s low labour costs, may be priced competitively in the international market, fully 80 percent of returnee entrepreneurs have a technology that is new for China, giving them a significant comparative advantage in the domestic market. This technology could be an important explanation of their business success. Moreover, when asked why they returned to China, 27 percent of our 2004 returnee entrepreneurs selected “I have a technology that I believe will have a good prospect in China” as their primary reason for returning, while another 28 percent chose it as their second reason. For these entrepreneurs, technology drives much of their activities.
Vanhonacker of HKUST and Dr. Chung Siu Fung, currently Director, Hong Kong St. John Cathedral HIV Education Centre, Flagstaff Hill, South Australia. 24 See Overseas Section of the Department of International Affairs of the Ministry of Education and the Intellectual Development Research Institute of the Shanghai Educational Sciences Research Academy, “The present state of overseas students returning to China to found undertakings and a study on policy,” from Chuguo liuxue gongzuo yanjiu (Research on Work Concerning Overseas Studies), no. 2, 2003, translated in Chinese Education and Society, vol. 36, no. 2 (March/April 2003): 18. 25 “The present state of overseas students,” p. 19.
13
Table 1. Level of Technology by Migration Status, 2004 Level of Technology
Returnee
Local
1. Newest international technology
34
9
2. Not new international technology, but new technology for China
46
32
3. New technology for this region in China
8
24
4. Not new technology
5
33
Source: Interviews in summer 2004. Note: Due to missing values on this question, there are only 93 returnees and 98 locals, not 200 in the combined sample.
Technology, therefore, is an important force bringing people back to China, because people overseas believe that possessing technology that is not available in China gives them a terrific edge in the domestic market. Wang Tao chose to study interventionist medical technology used for cardiovascular disorders, “a domain,” which according to a report “was a blank in China.” 26 With China spending US$100 million/year to buy catheters and stents, Wang Tao had a terrific “import substitution” technology. So, he studied for a Ph.D. in this field, then worked as a researcher Laser Catheter Laboratory of Wayne State University “where he had mastered what is currently the world’s most advanced technology and information for researching and manufacturing catheters.” He then returned to China in late 1995 and in spring 1996 established his own company and factory in China which manufactured catheters and stints. The tone of the story makes it very clear that he targeted a shortage sector, went overseas to master it, and then returned to China to manufacture it. To assess the impact of technology, we divided the data on level of technology employed by the entrepreneurs into two groups—(1) latest international technology and (2) other—or into three groups—(1) latest international technology, (2) not the latest international technology but 26
See “Special Report on Shenzhen,” Chinese Education and Society, vol. 34, no. 3 (May-June 2001): 87-88. The original story appeared in Jiedao (Street), no. 5 (1998).
14 new for China, and (3) not new for China, and then analyzed the data set using these categories or variables and both dependent and independent variables. First, by looking at the “target market” of those who brought technology into China, we can assess whether or not we can reject a “rent-seeking hypothesis.” Such a hypothesis would be based on the belief that people who return bring with them technologies that will give them comparative advantage in the domestic, rather than international market, where they believe “extra-normal profits” are relatively easy to attain. Our analysis of the 2001 returnees in the high tech zones did not allow us to reject our hypothesis that people were returning to target the domestic market. Of 20 people with the “newest international technology,” nine were selling their products almost entirely in the domestic market, seven were selling half their products domestically, and only four were engaged mostly in exports. 27 And of the 10 with new technology for China, 8/10 were selling almost entirely in the domestic market. What does our 2004 survey show? When we divide the 100 returnees into two groups, those with the latest international technology and those with lower level technology, and look at the proportion of sales involved in exports, we find that over 50 percent of those with world class technology are not exporting at all, while over 65 percent are selling less than 40 percent of their products overseas. But that finding may be the result of difficulties in exporting, rather than a disinterest in exports, as when asked what proportion of sales exports will be in the next five years, 58 percent expected to be exporting more than 40 percent of their production. Also, only 21 percent of those with the latest international technology expected to have no exports in five year’s time. Similarly, when divided the returnees into three groups, so that we can highlight people with technology that is only new for China, but not the latest international technology, we find that this group too is exporting very little of their product. Their mean level of exports is 13
27
David Zweig, Stan Rosen and Chen Changgui “Globalization and transnational human capital: overseas and returnee scholars to China,” The China Quarterly, 179 (September 2004): 752.
15
Table 2. Exports as Share of Sales, by Level of Technology, 2004 Exports as Share of Sales
Newest International Technology n ( percent)
0 17 (51.5) 1 – 20 1 (3.0) 21 – 40 5 (15.2) 41 – 60 3 (9.1) 61 – 80 3 (9.1) 81 -100 4 (12.1) Total 33 (100) Chi-square = 12.739, df = 5, p = .026 Source: Survey in summer, 2004 N = 86
Not the Newest International Technology n ( percent) 27 (50.9) 13 (24.5) 9 (17.0) 1 (1.9) 2 (3.8) 1 (1.9) 53 (100)
percent, compared to 33 percent for the group with the highest level of technology. Thus it appears as if they have brought back technology that is particularly well targeted at China’s domestic market. Still, in 5 years this group anticipates exporting 31 percent of its production.
Table 3. Anticipated Level of Exports in 5 Years, by Level of Technology Exports as Share Newest International Technology of Sales n ( percent) 0 7 (21.2) 1 – 20 4 (12.1) 21 – 40 3 (9.1) 41 – 60 10 (30.3) 61 – 80 7 (21.2) 81 – 100 2 (6.1) Total 33 (100) Chi-square = 9.894, df = 5, p = .078 Source: Survey in summer, 2004 N = 86
Not the Newest International Technology n ( percent) 13 (24.5) 9 (17.0) 14 (26.4) 13 (24.5) 2 (3.8) 2 (3.8) 53 (100)
The skills these entrepreneurs developed abroad are particularly useful for people who planned to return. Among this group, 50 percent of returned entrepreneurs had developed skills in scientific research, while another 16 percent had become skilled at commercializing R&D. And when we divide returnees into two technological groups, their current job is more likely to be related to what they studied overseas, relative to those with lower level technologies (p>.03). This suggests that those who bring back new technology are more likely to remain engaged with that
16 technology than those who bring back lower level technology, which in turn suggests that the technology or technological skills that they developed overseas is an important part of their return strategy.
Table 4. Impact of Level of Technology on Key Variables, 2004 A. When Level of Technology is Divided into 2 Levels Variable 1. Number of current shareholders 2. Total Registered capital 3. Difficulty in developing supplier/sales network 4. Percent of Sales Currently Exported 5. Anticipated percentage of sales as exports five years from now 6. Technical product/service design and development (Company's Performance)
Probability
0.0006 0.0004 0.0645 0.0016 0.012 0.0012
B. When Level of Technology is Divided into 3 Levels Variable 1. Whether current job related to skill developed overseas 2. Year company was registered in China 3. Number of shareholders at the start of the company 4. Total Registered capital 5. Percentage of sales currently exported 6. Anticipated % of sales as exports in 5 years 7. Technical product/service design and development 8. Sales growth (Company's Performance) 9. "Business results are more important than moral integrity" 10. "Paying kickbacks is not good for business" 11. "The use of independent external auditors is not necessary" 12. Social class
Probability
0.0265 0.0145 0.0007 0.0025 0.0077 0.0157 0.0022 0.021 0.0006 0.0924 0.0897 0.0001
Source: Survey of 200 entrepreneurs in 2004 Note: The two levels are "world class technology" and all other levels. The three levels are (1) newest international technology; (2) not newest international technology, but new for China; and (3)all other levels.
We were also interested to see if the level of technology was a meaningful dividing point within this group of 200 entrepreneurs (including both locals and returnees) and on what dimensions could we define these two groups as being different. Therefore, we ran a step-wise discriminant analysis, dropping out both variables that both had too many missing cases as well as variables that showed no statistical significance to the level of technology. In the end, we
17 found that when we divided the 200 entrepreneurs into three groups, we found that 20 variables created three significantly different groups. 28 But when we looked at the univariate relationships between level of technology and these 20 variables, only some variables were significantly related to the level of technology. We present those variables below (table 4).
Rewards to Technology An important reason for bringing a high tech product back to China is the belief that one will be financially or socially rewarded for doing so. Is this true? Among both the 2002 and 2004 samples, those with technology did better than those without, and in general, the higher the quality of the technology, the better they did. For example, among those interviewed in the zones in 2001, people who had higher levels of technology had higher incomes (table 5). 29
Table 5. Rewards To Tech Importers in Development Zones, 2001 Yearly Salary in RMB*
Importers
Non-Importers
Under 20,000
2.1
12.3
20,000-39,999
10.4
28.9
40,000-79,999
25.0
18.5
80,000-99,999
10.4
2.1
Over 100,000
20.8
6.2
Can't calculate income
14.6
6.2
No response
16.7
25.8
Source: Interviews in development zones, 2001. Note: * p.00). Even local firms did better if they had the newest international technology or, at least, unique for China. This finding reinforces the assertion that global linkages and access to high technology are critical for success in an internationalizing China. We also carried out cross tabulations to see whether some of the key variables with which we are concerned were correlated with the level of technology. In particular, we were interested 30
The mean score from 1-5, with 5 as very difficult and 1 as not difficult at all, was 3.3 for returnees with low tech versus 2.9 for returnees with high tech. It was only 2.4 for locals with high tech and 3.0 for locals with low tech. 31 This section draws on Wilfried Vanhonacker, David Zweig and Chung Siu Fung, “Transnational or Social Capital? Returned Scholars as Private Entrepreneurs,” in Yanjie Bian, Leonard Cheng, and Anne Tsui, eds., The Management and Performance of China's Domestic Private Firms: Multi-Disciplinary Perspectives (Armonk, NY: M.E. Sharpe, forthcoming). Other variables used to test different hypothesis are not reported here.
19 in the reasons that people returned to China—whether technology played a role in their decision, our so called “rent-seeking hypothesis”—and whether there was a shortage in their area of expertise, our “shortage hypothesis.” As mentioned above, the group that would be most likely to opportunistically seeking to take advantage of the Chinese market would be those who brought back technology that was not the newest global technology, but rather technology that was new for China. For that reason, we divided the level of technology into three categories, those with the newest international technology, those whose technology was not the newest international technology but was new for China, and others. Data from cross-tabulations confirms our hypotheses as well (table 6). In selecting reasons for returning to China, 27 of our returnees chose: I have a technology or product that I believe will have a good prospect in China. Of those 27 people, 17 or 63 percent were people in the opportunistic category, while only 30 percent of the people who chose this reason had the newest international technology. The answers to this entire question were statistically significant at the .08 level. Peoples’ second choices were not statistically significant; nevertheless, of 23 people who said that they “had a technology with a good prospect in China,” 14/23 or 61 percent were our opportunists. 32 Similarly, the correlation between level of technology and whether the returnee saw a shortage in their field in China was statistically significant and seems to confirm our shortage hypothesis. While 65 percent of returnees felt that their skill was “extremely short” or “relatively short,” the middle technology cohort, with new technology for China, felt more strongly than those with the newest international technology (54% vs. 29%) that their skills were “relatively short,” rather than “extremely short,” which was the purview of those with the newest international technology. The responses to this question were significant at the .04 level.
32
We also found that when we used the entire sample, including locals who had not gone overseas, the locals agreed with the returnees, to the effect that people who are returning are doing so because they believe that if they have a technology that is competitive domestically, they will make a lot of money.
20
Table 6. Major Reasons for Returning to China, by Level of Technology, 2004 Newest Global Technology No. Row % 1. Doing well overseas, but can do better in China 2. Have technology with good prospect in China 3. Difficult for Chinese to integrate overseas 4. I had planned to return before going overseas 5. Having difficulty making good living overseas 6. Faced glass ceiling overseas 7. Other TOTAL
New for China
Not New
Total
No.
Row %
No.
Row%
12
35%
19
56%
3
9%
34
8
30%
17
63%
2
7%
27
0
0%
0
0%
2
100%
2
4
40%
4
40%
2
20%
10
0 3 7 34
0% 60% 64%
3 1 2 46
75% 20% 18%
1 1 2 13
25% 20% 18%
4 5 11 93
Note: N=93
Technology and Values Are those people who bring back high tech different in terms of moral values? Several articles in the Western press describe cases where mainland academics have been caught bringing Western proprietary technology back to China. For a variety of obvious reasons, we did not ask this question in our survey. Still in a paper such as this one, we need to address this issue. One can propose two hypotheses: First, if returnees are bringing technologies that are not their own, they should not have greater concerns about intellectual property rights (IPR) or corrupt behaviour than returnees without technology. On the other hand, because they have much more to lose in a Chinese society that does not sufficiently recognize IPR, they may be more sensitive to issues of IPR than people who have not been overseas or have been overseas but did not bring back any technology. It is important to point out that most of the returnees in our sample reported being involved in creating the new technology while overseas. Of 100 returned entrepreneurs, 45 had
21 technology that was developed overseas, and 36 entrepreneurs reported that someone in their company had been involved in creating that product overseas. They may have been members of a research team that created the technology, and then decided to bring the technology back to China to reap profits for themselves. It is possible that a significant number of mainlanders working for firms overseas are surprised to discover that they do not own the technology that they have created, so they bring back the technology and either sell it to someone in China or use it to set up their own firm. The responses to a series of questions that tap the value structure of the returnees favour the hypothesis that the technology has been transferred through a relatively moral manner. For example, if we look at the mean responses to the statement: “I would walk away from any business deal which involves a corrupt practice,” returnees with technology are most likely to agree (2.00), followed by returnees without technology (2.33). The group least affected by this moral dilemma is locals with technology (2.88), perhaps because they have not worked under conditions where IPR is an important value. 33 Similarly, when responding to the statement: “If employees have a personal benefit in a deal, that’s fine with me,” returned entrepreneurs are much less likely to agree with this statement if they have a high tech product than in if they do not. People with high tech are also more likely to agree with the statement, “Paying kickbacks are not good for business” (p>.09) and the statement, “business results are more important than moral integrity,” (p>.0006). Therefore, some data suggest that people who own world class technology have a higher sense of morality than people who do not own such technology. These people have much to lose, they are more moral. It also suggests that among people who possess world class technology in China, those who studied and worked overseas are more motivated by good business values than locals who had not done so.
33
Locals without technology had a mean score of 2.41. The findings for these mean scores was statistically significant.
22
Conclusion Technology is a driving force behind the reverse migration underway in China. Governments at all levels want returnees to bring back the newest technology to enhance their economic development. So, they reward those who do so. In particular, the high tech development zones need these returnees and their technology, as it is part of their mandate to promote such development. And since they cannot accept firms into their zones that do not have cutting edge technology, they must encourage high tech firms if the zone is to develop. Overseas scholars, and those planning to go overseas, know that technology is the path to a successful life or profitable business back in China. To get positions at the Chinese Academy of Sciences one needs good technology. To get good funding in academic or scientific institutions, one needs good methodologies or technology. To have successful business performance, one needs foreign technology. It is necessary to admit that many people who return with technologies fail in China, as they cannot successfully commercialize their products. Nevertheless, we found a group of “opportunists,” who returned to China with technology that was not the latest internationally, but was new enough for China so as to assure the returnee a strong market position. This group of returnees has targeted the domestic market, trying to discern what type of technology is most likely to be profitable in the current stage of China’s economic and technological development. While we cannot say anything about the quality of the technology that is being transferred, except to say that a significant amount of respondents reported that they were bringing back the newest international technology, a significant flow of technology and information is underway and working its way back into China and filling in the gaps in China’s technological mosaic. Moreover, even if our opportunists are bringing back technologies that are not cutting edge, these technologies are unavailable or not widely disseminated in China, which is
23 why they bring it back in the first place. So, either firms would have had to buy them or import them. In either case, the economy benefits if the technology comes back into China. And much of this technology transfer is the result of the current reverse migration. To that extent, the government and the market are playing an important role in pulling in foreign technology. Whether that technology can be used effectively to strengthen China, however, needs a more careful and detailed analysis of the many new companies and research projects currently underway on the mainland.
