China’s role in the globalisation of innovation: an Australian perspective

China’s role in the globalisation of innovation: an Australian perspective

This article first appeared in the December 2008, Chinese-language edition of Managing Intellectual Property. To view the original article in Chinese, click here (PDF).

Australia's biotechnology industry is entering a mature phase. Although Australia has only 0.3 percent of the world's population, its share of revenue from the global biotechnology market is close to 1.5 percent. Local industry successes such as Relenza by Biota Holdings, helping to meet the challenges of bird flu, and the cervical cancer vaccine, Gardasil, from CSL Limited, exemplify the growth potential of Australia's biotechnology sector. However, with maturity, comes a willingness to practice pragmatism. The adage "think globally, act locally" is no longer appropriate for rapidly developing industries, especially in light of current financial pressures and challenges The intense competition for infrastructure and finance in Australia is delaying the development of biotechnology innovation especially for human and animal therapeutics. Such challenges are motivating Australian entrepreneurs to confront the perceived difficulties of collaborative ventures in China. To think globally, one must act globally.

China is the most populous country in the world with over 1.2 billion people. This represents an enormous domestic consumer market. In addition, China plays a pivotal role in assisting in the globalisation of innovation from other countries and in particular Australia. China is providing a pool of highly educated and experienced researchers, specialised services and research tools which combine to create an invaluable resource which the Australian biotechnology industry is now beginning to access. China has relied heavily on the social networking approach of Guanxi to rationalise utilisation of its resources whereas Australia has traditionally relied on market forces to deal with these issues. The Australian biotechnology industry has reached a stage of maturity that requires development of a resilience to fiscal pressure and a Guanxi approach to complement the challenges it faces. Accordingly, China is viewed as being able to complement the Australian biotechnological industry's strong foundation in basic science and its application to medical discoveries with China's immense capacity to develop these discoveries towards clinical use. This collaborative approach is aiding the Australian biotechnology industry to achieve its globalisation potential.

The journey of conception to commercialisation of innovation is a multi-participatory process. Government policies in relation to tax, research and development structures, ownership and even immigration have a major influence during this process. This may have contributed to perceptions that in China the requirements for approval at various levels to enter into collaborative ventures, or to import or export products or services, were overly onerous. However, a greater awareness of cultural sensitivities and differences, combined with encouragement by the Chinese Government at the policy level, have enabled new initiatives from Western entrepreneurs including Australian biotechnology innovators to set up collaborative ventures in China with significant success.

The willingness of Australian entrepreneurs to access China's resources comes at a time of modernisation of the rules governing intellectual property protection in China. Patent application filings in China have increased by about 20% each year since 1997. Whilst there are some uncertainties as to implementation of particular laws, there are nevertheless growing similarities between intellectual property in China and Europe in terms of what constitutes patentable subject matter, thresholds of novelty and inventive step and ownership of intellectual property rights. This is permitting development of a growing confidence with the protection of intellectual property in China. Most research in China is conducted by Government owned organisations or state-owned enterprises which have become privatised. Intellectual property management is complicated by rules of ownership and distribution of royalties. There is also the issue of technology being classified as prohibited, restricted or permitted for import or export into or out of China as governed by the Chinese Technology Import and Export Administration and Article 10 of the Patent Code. Notwithstanding these challenges, according to a poll conducted by Hong Kong consulting firm PERC as reported in Australian Legal Business Issue 6.10, 2008, Hong Kong has one of the three best Asian judicial systems in relation to level of legal education, transparency, independence of judicial systems and intellectual property protection.

A model is, therefore, emerging which utilises the financial resources of China combined with its drug development, manufacturing and distribution expertise to complement Australian medical and scientific discovery capabilities combined with its regulatory, intellectual property and business management systems. The applicability of this model is evidenced by the emergence of Western ventures in China such as the Bristol-Myers Squibb's facility in Shanghai, called SinoAmerican Shanghai Squibb Pharmaceuticals Ltd (SASS), and the various joint venture arrangements between China's and Australia's universities and research facilities.

Australian biotechnology entrepreneurs are now developing Sino-Western collaborative ventures by working within the confines of regulatory control. Particularly innovative joint ventures between Chinese research institutes and Australian companies are proposed, for example, to take in vitro validated therapeutic candidates identified in Australia and subject them to research and clinical development in China leading to eventual licensing out of therapeutic products.

China is providing much needed specialised services to complement the development of candidate therapeutic compounds in Australia for eventual release to the global biotechnology market. China is facilitating collaboration by allowing and in fact encouraging wholly owned foreign entities and joint venture relations. It is the pragmatic approach of Guanxi, involving cultural, economic and academic understanding, which is promoting stronger ties between Australia and China which will enable enhanced globalisation of Australian biotechnology innovation.