Senior executives of the technology ecosystem and investment community in Shanghai gathered at the Nova Dinner, hosted by Savills, to discuss the future of Shanghai and other cities in China as innovation hubs.
Shanghai is clearly a global business hub and China’s financial capital. It’s growing base of digital media and entertainment companies, availability of educational programs and access to and capital tech infrastructure make Shanghai the front-runner in KPMG’s ranking of global innovation hubs. But when it comes to most metrics on entrepreneurship, Beijing is doing far better. Zhongguancun’s ecosystem of new ventures, tech giants, research universities and professional services firms has developed tacit knowledge and an entrepreneurial culture that is hard to replicate. What does this mean for Shanghai’s plans of becoming a global innovation hub?
Does Global Talent Matter?
With over 200,000 expats, Shanghai is positioned as a bridge between China and the rest of the world. The city’s strategic importance will grow as China strengthens its position as an economic powerhouse. But how much does an international workforce matter for innovation and entrepreneurship right now? Some guests at the Nova Dinner disagreed about the importance of global talent for entrepreneurship, pointing out that most startups’ focus is the domestic market.
While it is true that most startups in China right now focus on internal customers, the next natural step once the market is saturated will be international expansion. China is transitioning from a country that replicated technology to an exporter of ideas and patents, making Shanghai’s cosmopolitanism a valuable asset over the long-run. Exposure to foreign languages and cultures also makes locals in Shanghai able to scale up domestic ventures. A diverse environment and awareness about global trends certainly encourage creativity as well.
Forget Traditional VC Assumptions
In the American model of entrepreneurship, location is a big deal for funding. Startups from all over the country will put their staff in a plane bound to Silicon Valley or San Francisco. VCs prefer physical proximity with their portfolio companies as it facilitates supervision, while founders value the availability of advisors and collaborators. This is best exemplified by startup accelerators, which often require relocation. Under those assumptions, Beijing’s entrepreneurship ecosystem might come off as a direct threat to innovation in Shanghai, but there are reasons to believe things might be different for China in the next few decades.
To begin with, geographical proximity is generally less important now in all aspects of life. Silicon Valley developed as a tech hub in the late 20th century–before iPhones and WeChat existed. Better internal infrastructure in China makes business traveling easy and cheap. In addition, we are already seeing successful efforts to create entrepreneurship hubs all over China, suggesting it might not be a zero-sum competition between cities after all. A guest pointed out how medium-sized cities like Qingdao are successfully setting up incentives to attract startups. Chinese cities see a remarkable level of scientific collaboration, with Beijing and Shanghai having formed 382 bilateral institutional partnerships in 2016 according to Nature. Some guests claimed that VCs actually look for geographical diversification of their portfolio within China.