Sharing

They have a vision of a people-centered development, where they want to fight against poverty and meet the basic needs of the people to meet common prosperity. They aspire to create a better and more sustainable social security system that is able provide education, healthcare and cultural institutions to everyone (Li, 2016, 12-13).

Opportunities and barriers within General Framework Conditions

For China to move from an efficiency-driven economy towards an innovation-driven economy, the CPC must improve their education system, enhance better market and labour optimization, provide incitament for financial market development and investment opportunities, and increase knowledge and technology implementation in the overall Chinese entrepreneurial ecosystem. Simply put, innovation and knowledge-creation must accommodate for previous drivers of growth (Woetzel et al. 2015).

The CPC are, as the rest of the world, increasingly interesting in fostering entrepreneurship.

According to Acs, entrepreneurship is good for economic development, in the sense that entrepreneurship creates new businesses, which create new jobs, strengthen competition and aspire to overall change in production due to more efficient production-methods in society (2007, 97). In the modern economy, knowledge is the driving force, and previous drivers such as raw materials and physical labour has been replaced (Drucker, 2001; in Acs 2007).

Entrepreneurial Framework Conditions in Shanghai

China has experienced massive growth over the past 30 years and this has especially developed

tier one cities like shanghai into rather sophisticated and fast paced places for entrepreneurship

(SovereignGroup, 2015, 3). A lot of people come here with a pretty western mindset for

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entrepreneurship and Teisen even refers to Shanghai as having a Silicon Valley DNA in terms of entrepreneurial thinking (11:18). All of the interviewees seem to share the same understanding of Shanghai as an interesting and international place with many business opportunities - even in the small niche markets. However, it is also the general perception that Shanghai is a very complex and immensely competitive market.

China aspires to incorporate foreign knowledge and experience as a part of the business environment. Especially Shanghai has an international and fast paced environment, which makes it far more evolved than other large tier one cities like Beijing. At least in terms of foreign entrepreneurship (Brandtoft, 08:09). For foreign entrepreneurs, Shanghai is more interesting than Beijing, due to many opportunities in a broad array of different sectors as well as diverse environment (Henry, 5:48). However Shanghai is not a forgiving place and Alding does not think the success rate is very high for entrepreneurs (24:34). Both O’Connell and Henry believe that a lot of foreign entrepreneurs underestimate how difficult and competitive the market is, and consequently get the business environment, cultural understanding and positioning all wrong (4:06; 17:00). Also, to Henry, Shanghai is so developed that it is just like many other highly developed cities in terms of maturity and cost. Entrepreneurs should consider other cities in Asia, because there are more opportunity, lower entry barriers and living cost (Henry, 28:35). In contrast, O’Connell believes Shanghai to be very cheap and time-saving in terms of software development compared to places such as Copenhagen (17:47). Shanghai is known to be one of the most interesting places for high-tech foreign entrepreneurs, and the contrasting opinions about the environment might be due to O’Connell working within the tech environment and Henry working within non-tech.

The physical environment for entrepreneurs in Shanghai

To implement the CPC’s innovation-driven development it is the ambition to turn Shanghai into a global innovation center by implementing reforms to enhance technological, research and science related innovation, the transfer of knowledge and increased protection of intellectual property rights.

To enable all of this, the CPC has invested more than 3,7 % of Shanghai’s GDP to optimise the industrial structure and build an international advanced science and technology park. Besides from the construction of high-tech research facilities, the CPC also aims to attract top laboratories, research institutions, universities and multinational businesses from all over the world (Gov, 2016).

China is making market and labor reforms, reducing the regulatory and entry barriers for new

businesses and entrepreneurial spirit, while at the same time supporting the incubator facilities and

accelerator programs to foster entrepreneurial incentive. Even though the cost of living in Shanghai

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is cheaper than in Denmark, it is still one of the most expensive cities in China. In Shanghai there exists an increasing number of places, where international entrepreneurs can establish themselves, seek business partners and get information about funding. Generally, these places are split between tech and non-tech entrepreneurs. Usually, these hubs come with a wide array of different networks and events that everyone is welcome to join. From visits to some of the incubator hubs in Shanghai and Copenhagen, such as Naked Hub, Innospace, ChinaAccelerator, Rainmaking Loft and Dare2Mansion, it is my impression that they provide a cosy atmosphere, creative environment and professional network that many early stage entrepreneurs need.

Finance

Finance is one of the most widely recognized regulators of allocation of effort to entrepreneurship (Levie & Autio, 2008, 41). The access to funding in China is a complex matter and difficult to get a clear picture of. In cities such as Shanghai with a thriving international entrepreneur ecosystem, there exist funding opportunities from the first early stage funding rounds to larger rounds.

There is overall agreement among the interviewees that there is a lot of money in the ecosystem, but it is difficult to find the right funding pools and get an overview of existing opportunities. In accordance with aforementioned growing middle class, there is a lot more money in the hands of private people and companies, which creates a lot of opportunities (Teisen, 20:38). The CPC has made it a lot easier and more accessible for local entrepreneurs - especially within science - to get access to government-led initiatives. This will most likely benefit local entrepreneurs and only in very few cases benefit foreign entrepreneurs.

Despite that, there might be a growing trend for some of the very successful Chinese entrepreneurs

such as Jack Mae (founder of the world’s largest e-commerce Alibaba), and other giant e-commerce

successes such as Tencent and Chinese Google pendant Baidu, to re-invest large amounts of

money in local as well also foreign businesses (Brandtoft, 5:16). Despite that, it appears that such

investors are primarily investing money in foreign companies, when they have reached a

considerable size, proof-of-concept and success. This is in accordance with Henry, who believes the

funding pools are drying out quickly and the investments made are fewer, but bigger (Henry,

07:51-08:37). Accordingly, all of the interviewees believe that foreign entrepreneurs should bring money

from home to help them get settled and wait to seek funding until they have achieved the same proof

of concept and success in Shanghai.

38 Government policy and regulations

Governments can directly affect entrepreneurial businesses through their regulatory control, and EFC defines this as “The extent to which public policies support entrepreneurship” (Singer et al., 2014, 57).

Chinese policymakers should focus on creating an environment and market conditions that are responsive and interesting to motivate entrepreneurs as well as being in line with the overall economic situation in the country (Singer et al, 2014; Acs, 2007). The CPC aims to create better incentives for entrepreneurs to start their business, generate new knowledge and create more jobs, which contribute to national growth. Also by supporting a creative environment that foster new ideas, they will also become a vital part of the Chinese development and thereby reach the goal to become an innovation and knowledge-driven economy. Since Shanghai is one of the most developed cities in China, it makes good sense to create the best conditions to foster entrepreneurship and innovative development there. However, frontier entrepreneurship requires a lot from the political system, in terms of stronger protective property rights, an impartial legislative system, transparent regulations and processes, freedom of speech as well as multiple sources of idea generators and sparring partners (Huang, 2010). Even though it is a political objective for CPC to foster frontier entrepreneurship, it can be questioned whether China currently has a system that is based on such democratic principles.

In the 13-5 the CPC has also emphasized the importance of opening up and creating international collaborations. Brandtoft stresses this and believes that the governmental changes and investments in entrepreneurship will have a positive effect in a few generations’ time, since it will have built a really solid foundation (Brandtoft, 04:38+ 05:49).

The CPC has been loosening up the regulatory process towards entrepreneurship in terms of getting

a license. However, the legislative and regulative areas are still defined by high complexity and with

a lot of bureaucratic steps to go through. In China, foreigners must apply for an Wholly

Foreign-Owned Enterprise license (WFOE) if they want be registered in China. Even though the process of

getting one has become easier, it often takes a long time and persistence (UM, 2012, 21; Alding,

35:23). According to interviewees, there are slightly different opinions about how difficult it is to start

a business in Shanghai. According to Teisen, foreigners cannot just start a business as easy as

locals and have to go through a bureau to do it (08:00). Despite that, he believes that it has become

much easier for foreigners to establish a business during his 25 years there. However, Alding, who

has been in Shanghai for six months, thinks that the CPC needs to make it easier to establish a

business, as it is “absolutely hopeless” at the moment (22:39). Due to the complexity, it is considered

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common practice to bend the rules and there is no way of knowing when you encounter a rule that must be followed, and when you encounter one that can be somewhat interpreted - unless you are a local or have the right connections (Alding, 35:23-36:40).

To sum up, despite the CPC’s ambition to liberalise the market in terms of regulations and processes, it is still not easy to register a business in Shanghai. Danish entrepreneurs will have to lower expectations and accept different, complex and often slow regulations and processes. As previously mentioned, Denmark is one of the easiest countries in which to start a business, and according to Alding“... you find out how big the contrasts are, and how much easier it is to be an independent business owner in Denmark compared to China” (own translation, 24:12). All in all, this prevents frontier entrepreneurship to happen at the same speed as in e.g. Denmark, thus confirming that it requires time and consistency in policy interventions in order to build factors that contribute to frontier entrepreneurial activity (Singer et al, 2014, 20).

Cultural and social National Cultural context

Recently, a more positive stance has developed towards self-initiative, independence, innovativeness, individual effort as well as creativity. This have most likely also changed the perception and thereby desirability for the Chinese to become entrepreneurs.

For example, previously China did not have a history of perceiving entrepreneurs as someone, who created growth for China. (Huang, 2010). On the contrary, most commentators credit the Government, foreign direct investment and massive infrastructural improvement as the reasons for China’s development and growth. However, with the Government's emphasis of innovation through entrepreneurial businesses and success stories such as Alibaba, Tencent and Baidu, it has influenced people’s perception and made entrepreneurship more desirable and socially acceptable.

Entrepreneurial culture and social norms

Entrepreneurship has also increased considerably in China during past couple of years and changed

the way it is perceived by the public. First of all because the media are portraying it more frequently

and in a more positive way. Stories about successful entrepreneurs make the headlines, many books

have been written about the subject and TV shows are being broadcasted on TV. Moreover, Chinese

scientists have contributed to research about entrepreneurship, which has given it a more legitimate

image, too (Yang, 2012, 10).

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In terms of culture and language barriers, many experienced entrepreneurs and investors advise foreign entrepreneurs to get a local chinese partner. All of the interviewees agreed that getting local help to understand the culture, overcomes language barriers and establishes connections that are vital to become successful in Shanghai. Nevertheless, one must be patient and take the time to find the right partner. As Teisen argues “we need some help, definitely. We need some people to help us read the signs and understand a little bit more. We cannot rely on ourselves ... Coming here alone and trying to do everything by yourself, I think that would be an uphill battle” (25:32 + 26:57).

Professor and leader of Copenhagen Business Confucius Institute (CBCI), Verner Worm, argues that it is crucial that the ICDK headquarter in Denmark is aware of and take into consideration how demanding it is to enter the Chinese market (Hansen, 2011). Furthermore, it is important to create alignment between the Chinese business culture and foreign business strategy and product offer (Hansen, 2011). It is worth mentioning the Chinese language as a barrier for Danish entrepreneurs.

Worm argues that you cannot understand China, if you do not understand the language as a lot of understanding about the business culture is embedded in Mandarin and related Chinese dialects (Hansen, 2011).

Competitive forces: direct and indirect

This is a brief overview of ICDK’s direct and indirect competitors in Denmark as well as in China (see delimitations).

Direct competitors are defined as businesses offering the similar services as ICDK (Kotler & Lee, 2006, 31). ICDK’s primary competitors are other institutions or people, who offer similar accelerator services to assist Danish entrepreneurs in going to China. Indirect competitors are defined as those businesses or actions that Danish entrepreneurs can use to fulfill the same needs (Kotler & lee, 2006, 31). ICDK’s indirect competitions could be defined as the Danish entrepreneurs, who go to China without using such support services.

In the database, www.Inno-overblik.dk, (information about a broad array of different areas related to entrepreneurship), more than 30 accelerator programs exist in Denmark with the purpose of assisting entrepreneurs in going global. Besides this, are all of the additional programmes and support functions. However, ICDK have a competitive advantage and edge, because they seems to be one of the few, who are specialised towards China.

Unfortunately, I have not been able to find a Chinese pendant to www.Inno-overblik.dk, so it has not

been possible to provide an overview of the international accelerator services in Shanghai. However,

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according to O’Connell, who is an employee at ChinaAccelerator, numerous accelerator programs

exist that are specialised in guiding foreigners to China, since it is considered to increase the chance

of success (O’Connell, 09:24). Some of these accelerators have a very strong position on the market

and one of them is ChinaAccelerator. ChinaAccelerator is a part of the Global Accelerator Network

(GAN) that has collaboration partners all over the world, along with a vast amount of experience in

assisting entrepreneurs in setting up their business in China (O’Connell, 12:27). They offer a very

large global Chinese network, a well-structured six months accelerator program, an investor network

along with a lot of experience in cross-border entrepreneurship (O’Connell,13:27-27:33). In this way,

they have an overall stronger position in the competitive market than ICDK. As a result, it is important

for ICDK to monitor and compare competitors and their services, prices, channels and promotion,

while at the same time evaluate how their potential customers perceive them compared to

competitors. This enables a better choice of marketing strategy and development of a stronger

position in the market (Kotler & Lee, 2006).

In document INNOVATION CENTRE DENMARKS’ POSITIONING STRATEGY TOWARDS DANISH ENTREPRENEURS (Sider 36-42)