Why Coming in Second Isn’t Always a Bad Thing for China.

Monday, August 23, 2010 20:35

Over the years, there have been more than a few articles on China’s interest, or lacking interest, in developing domestic innovation and IP in the commercial sector, and China’s use of soft power, or failing to use its soft power, to promote the best interests of the state. And while these issues are rarely tied together, the recent article Pickens urged Bush to take Iraq’s oil in the Aspen Daily News led me to.

Issues that may or may not have little in common, the article took me back to my junior year at the University of Missouri where I learned about Porter’s 5 forces and the widely held belief of first mover advantages. That for a firm, it is important to stay ahead of the competition, and develop “sustainable” competitive advantages in the market.

In the article though, a different reality is being reported

Instead of Iraq’s greatest oil supplies going to the country that waged a seven-year war of liberation there, Pickens bemoaned, they went to China, which cut deals to mine the oil fields of Ramallah, which Pickens estimates holds 15 billion barrels of crude.

“Here we were,” Pickens said. “We paid the price and [we] don’t get it … . It’s heartbreaking to me to lose our people and the Chinese end up with the oil.”

Which led me to think about the wider application of this is, and the fact that while many will bemoan the fact that China will not use its power for the “greater good”, or that it firms (or people) are unwilling to innovate, this article highlights a simple point. That it is simply easier to let others to lead, and that leading isn’t all that it is cracked up to be… particularly if you are a country (or a firm) focused on problems that you have been facing for decades. That, while there are certainly opportunities for being the first to develop a new product, or to hammer out an international conflict, there are too many cases supporting the business as usual model.

Which leads me to my next point.

I have met many people in China, and who follow China, who are literally waiting for the day for this condition to turn around.  That there is going to be this tipping point where China takes the baton and runs with it.  And it is an assumption that in many cases limits their engagement in China as they are either afraid of investing (and getting screwed) in China, or see this tipping point as an opportunity in itself.

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