Too often China is seen by UK firms only as a big export market, or a source of lower-cost labour. While clear risks remain for any business seeking to operate in China, there is a growing acknowledgement that China is developing a powerful ‘engine’ for creating and commercialising innovation.

For example, in China’s Absorptive State, Nesta outlined China’s impressive ability – demonstrated in industries from supercomputing to high speed rail – to rapidly absorb global technologies and ‘re-innovate’, while adding novelty and value to ideas and technologies in the process. And in Accelerated Innovation in China, Cambridge’s Professor Peter Williamson explored the ways private Chinese companies from Lenovo to Tencent were slashing the time and cost requirements of innovation: bringing technology rapidly to full commercial scale, developing process innovations necessary to produce it efficiently, and creating complementary innovations for leveraging new ideas, technologies and inventions.

In fact, we believe that China offers serious, distinct and interesting opportunities for UK firms, including small firms. Collaborating with China for innovation may even be part of a solution to a long-standing concern about UK innovation: its ability to scale innovations to a commercial level which would allow UK firms to better compete globally.

In our new report Harnessing China’s Commercialisation Engine, we examine the experiences of five UK-based high tech innovative businesses who have sought to harness elements of China’s innovation and commercialisation engine. We highlight how they entered into partnerships in China at different points in the process of commercialisation and we investigate the kinds of Chinese innovation capability they drew upon. We also explore some of the considerable challenges they faced and how they sought to overcome them.

We find that:

• Despite the acknowledged risks, some innovative UK small businesses have been able to create successful innovation partnerships with China
• The firms are harnessing Chinese innovation capabilities not only around research and development, but in prototyping, exploiting sunk innovation capital, accessing high-level science and engineering talent, providing proof-of-concept for technology, scaling an innovation, and user testing in the consumer market
• Smaller firms are likely to need to focus entirely on China as an innovation partner, as the senior resource required to make the partnership work means it needs the company focused on the Chinese opportunity
• Firms need to pick a partnership model that allows them to access the key Chinese innovation capability they need, but remain flexible as the partnership develops – because the markets are moving so fast in China
• Firms need to be cautious around intellectual property – seeking a pragmatic solution which avoids the need to enforce IP rights

As UK firms increasingly look to China for developing their innovation it is important that there are enough examples of how success can be achieved, and how the pitfalls can the avoided. Aiming to partner for developing and scaling an innovative technology, product or service with China innovation is a different process and experience than exporting or seeking to manufacture a completed product.  Gaining a better understanding of the different pathways to scaling an innovation with China – and the kinds of opportunities that have been successful – will help the UK and Chinese government support the expansion of such partnerships in the future.