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"Enhance Asian Capacity in IT Industries through Enterprise-University Cooperation"

June 7, 2001

Min Wei Fang
Chairman, Founder Group

Distinguished Participants,
Ladies and Gentlemen:

It indeed is a great pleasure and honor for me to be invited to give a presentation to such a distinguished audience. Today, I would like to argue the strategy to enhance Asian Capacity in IT industries through enterprise-university cooperation. As most of us have experienced, the rapid advancement of science and technology, especially the revolution of information technology, have changed dramatically our way of thinking, learning, communicating, and working. To a certain extent, it has also changed what we produce and how to produce. IT has become one of the driving forces for economic growth. The capacity to innovate, accumulate, deploy, and utilize knowledge information, becomes very important in the new development process for a country or a company.

Indeed, the IT revolution has led to enormous changes of the world economy into to a knowledge-based system. The major sources of higher productivity and economic growth depend more and more upon the innovation of knowledge information, especially the better integration of the generation, processing, dissemination and application of knowledge information. Not only will the IT related industries become the largest industries, knowledge innovation and information technology will also stimulate economic growth through its application in other sectors. The traditional manufacture, energy, materials, agriculture, and services can only perform well with application of the high-tech based information and communication system. It becomes commonly recognized that the quality of the knowledge information and the efficiency of acquiring it will become the strategic factors in both competitiveness and productivity for a country or a company (Carnoy 1992). Furthermore, information technology has made the knowledge-based economy international by nature, in which capital, investment, production, management, markets, labor, information, and technology are organized across national boundaries. Globalization has become an irreversible and irresistible wave.

However, the capacity of IT industries varies dramatically among different regions, different countries, different industries and companies, because the key factor in this capacity development, that is, the innovation capacity, is so different from one country to another. And also, information technology is not equally available to all countries and companies, which thus are integrated into the IT related, knowledge-based new world economy at very different levels. While the development and application of IT has already become a norm in some IT- advanced countries, the variation of the availability and capability of IT results in serious digital divide. In general, Asia is left behind of North America and Europe in IT in terms of telecommunication access, computer penetration, and more critically, the number of internet hosts. For example, in October 1998, the per 1000 inhabitants internet hosts in North America was 69.74, while in Asia was only 0.87. North America was 80 times ahead of that of Asia. Two years later in October 2000, this divide was further widened. It was 168.68 in North America, while it was only 1.96 in Asia. North America was 86 times ahead of Asia. Even the most developed Asian country, Japan, also was left behind by North America. For Example, in July 2000, the internet host per 1000 inhabitants in the United States was almost 250, while that for Japan was only about 40. In terms of PC ownership per 100,000 inhabitants, China only has about 880, while the United States has about 50,000, 55 times ahead. In terms of absolute number, the US has 164 million computers, while China only has about 16 million in the year 2000.

Thus the current development process is very asymmetrical. Regions, countries, companies and individuals, that can take the historic opportunity for development of this IT-related, knowledge-based economy, will leapfrog the development process and compete in the international economy. Others that can not catch the opportunity will fall further behind of the main stream development of the world.

After a careful examination of the North American experiences, we believe that the first and foremost thing for IT development is, of cause, to formulate an appropriate policy framework to encourage competition and efficiency in the IT sector. What I would like to argue here is that similarly important thing is, that because of the very nature of IT industry, in order for Asia to catch up, to change the digital divide into digital opportunity, Asian countries have to better integrate long-term basic research, education, training, R&D, production, and commercialization. International experiences showed that this strategy enhance the efficiency of the integration of information generation, processing, dissemination and application. This will call a close cooperation between enterprises and universities. Universities as knowledge-based institutions have advantages in long-term research, education and training, while industries have advantages in R&D, production, and commercialization. The better integration of these links is critical.

In the development of process, Founder Corporation has tried to implement this strategic thinking and has gained some initial experiences and lessons. Founder Corporation was incubated by and developed based on the Peking University's scientific and technological innovation accomplishments. The company was established in 1986 outside the university structure as an independent legal entity of an enterprise. The cooperation of Founder Corporation with Peking University is developed naturally because of its special and close relationship with the university. This cooperation is called a dragon system, which includes the upper reaches, middle reaches and lower reaches. The upper reaches of this system is the Institute of Computer Science and Technology of Peking University and the National Key Laboratory of Text Processing Technology located at the university. The function of this upper reaches, as an integral part of the university, is mainly teaching and research, which have been engaged in human capital generation and new knowledge generation through long-term basic research. The middle reaches is the National Engineering Research Center for Electronic Publishing Technology developed at the university and the Founder's Research Institute with more than 300 professionals engaged in R&D work. The uniqueness of the middle reaches is that it is a mix of both the engineering research center of the university and the Founder's R&D unit of the company. The lower reach of the system is the Founder Corporation engaged in production and commercialization. This cooperative system makes it possible to better integrate long-term basic research, applied research, teaching and training, development, testing, production, marketing, and customer services. The partnership also makes it possible for the Founder Corporation to continuously obtain the research achievements of the university's innovative activities and obtain well-educated graduates. One of the major technological innovations from the university to the company for production and commercialization is the computer-laser technology for typesetting and publishing system for newspaper in Chinese language, which has already occupied over 80% of the domestic market in China, and 80% of the international market. Founder has also become the second largest PC producer in China. At present its business and products cover a wide area in both computer software and hardware. Its business volume increased from RMB 500 million yuan in 1992 to 1 billion in 1993, 2 billion in 1994, 4 billion in 1996, 8 billion in 1999, and over 10 billion (about 1.2 billion US dollars) in 2000, becoming the largest university-affiliated high-tech enterprise in the IT industry in China. The cooperation between Peking University and Founder Corporation not only contributes directly to the development of the country, it also supports the university's teaching and research significantly as a feedback. Not only did the financial support from the company help the university tackle the financial constraints it faced, but the participation of the faculty members and graduate students based on their expertise, research agenda, and learning needs in the R&D work and production process enabled them be better aware of the social and economic needs, acquire inspiration for further research, and develop more relevant and updated curriculum, thus making the university stronger, while stronger universities will further support the development of the company and promote development of the country.

I do not mean that the cooperation between Founder Corporation and Peking University is a model appropriate for all other IT companies around the world. In reality, many companies simply do not have that kind of special close relationship with universities. What I argued here is that IT industries in Asia should enhance their cooperation with universities in general. Actually, in the US, the high-tech companies in IT industries developed much more close relationship with universities at a much earlier time. They are more advanced than their Asian counterparts in this regard. This probably is one of the major reasons why the US IT-industries are ahead of that of Asia. The development of some of the Silicon Valley companies with Stanford University in California probably is one the examples. According a report, the High-tech companies in Silicon Valley alone recorded earnings of 85 billion dollars in 1995, and 62% of these earnings can be traced back to companies whose founders had connections with Stanford University to a certain extent (Casper 1998). Similar developmental phenomena can also be observed in many other places around the world. Therefore, as argued by Castells (1991) that, if knowledge information is the electricity of the new world economy in the information age, university is one of the major power sources on which the development process of the 21st century has to rely.

It is still at the very beginning for Chinese enterprises in IT industries to think and practice along this direction, and Founder Corporation still is a small company in comparison with giant corporations in the IT sector in the US, Japan and Europe. Furthermore, I am fully aware that there are still many policy sensitive issues that we have to tackle in order for enterprises to better cooperate with universities. However, we strongly believe that, from a long-term perspective, this kind of cooperation between enterprises and universities are mutually beneficial. It has played an important role, and will play a more important role, in promoting development of information technology in Asia. It is in this sense that we argue the cooperation of enterprises and modern research universities could form the powerful engine of development in the new world economy.

Thank you.

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.