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Research Questions

  1. What are the existing models of innovation in China's Guangzhou Development District?
  2. Are any international best practices in developing a high-tech cluster applicable to the goals for Knowledge City?
  3. What should be in a strategic plan for developing Knowledge City as an innovative area that attracts high-tech companies and enables their growth, attracts and retains highly skilled workers, and ensures the availability of innovation-oriented financing?

Abstract

China's Guangzhou Development District (GDD) will be the site of the new innovation cluster known as Sino-Singapore Guangzhou Knowledge City. Jointly developed by GDD and Singbridge of Singapore, Knowledge City will be an environmentally and technologically advanced city that hosts innovative industries and their associated knowledge workers. To achieve this goal, GDD must design a strategic plan to pursue three primary goals: to attract high-tech companies and enable their growth, to attract and retain a highly skilled, innovative workforce, and to ensure the availability of innovation-oriented financing. This report serves as an outline of a set of strategies for Knowledge City and is intended to help GDD create conditions that are conducive to innovation and the commercialization of new technologies. To this end, it assesses the challenges that GDD will face, recommends policies to address these challenges, and proposes a coordinated set of actions to implement these policies in a way that meets Knowledge City's goals. It also offers a general timetable and priority ranking for the policies and actions to help ensure that Knowledge City is able to attract top talent and provide a growth-oriented environment for innovative businesses and research institutions. This is a companion volume to another RAND report, Creating an Innovation System for Knowledge City (TR-1293-GDD), which presents results from the interim analyses and supporting evidence for the study's conclusions.

Key Findings

Where Knowledge City Will Not Have an Innate Advantage over Competing Areas, It Must Develop Assets to Attract Innovative Firms and Their Workers

  • Guangzhou Development District (GDD), the site of Knowledge City, and the surrounding region have many features that will be attractive to high-tech companies, including transportation infrastructure and seaports, universities, and a solid manufacturing base.
  • GDD also faces a number of challenges in terms of Knowledge City's distance from Guangzhou city, its heavy focus on manufacturing, the intellectual property rights framework in the country, and other conditions.
  • Marketing is critical for Knowledge City: GDD must convince innovative companies and talented individuals to stake their futures on an unproven new development.
  • Anchor institutions, such as multinational firms or large research institutions that can establish a location in Knowledge City, are the nucleus around which a geographical high-tech cluster can form.

Establishing an Innovation-Oriented Financing System Will Be Critical to Knowledge City's Development

  • Survey results showed that entrepreneurs in GDD have trouble accessing early-stage financing, or financing at the point when a technology has been developed but is not yet commercialized.
  • Angel investors appear to invest in a very small number of firms relative to the total population of high-technology firms in GDD. Case studies of Silicon Valley and Maryland showed that at least some innovative areas have active angel investment networks, which GDD lacks.
  • Although commercial banks cannot be a primary source of innovation-oriented financing, they are an important part of the financial ecosystem, and GDD will need to ensure that commercial bank branches are present in Knowledge City.

Recommendations

  • To help ensure Knowledge City's success, Guangzhou Development District (GDD) will need to create an environment will both attract and enable the growth of high-tech businesses. For example, it should create an office to assist companies with legal, administrative, and financing issues, with case officers who ensure that companies are receiving the benefits for which they qualify and successfully negotiating the tax code and other aspects of doing business in China.
  • GDD should consider both tax and non-tax incentives to attract businesses to the area. It must also ensure that there are strong protections for intellectual property rights but that government policies also stimulate knowledge sharing and worker mobility among Knowledge City firms.
  • GDD would benefit from building stronger links to wealthier markets, including those in Hong Kong, Taiwan, Japan, and Korea. It should also build networks through Chinese workers overseas and establish a strong marketing effort to attract returnees to Knowledge City.
  • GDD will need to address quality-of-life issues to attract and retain highly skilled workers, including, for example, establishing elementary and secondary schools and making Knowledge City a destination for business, entertainment, and shopping.
  • GDD can enhance its current financing tools by working to attract angel investors and outside venture capital firms and by ensuring that commercial banking has a presence in Knowledge City.

Table of Contents

  • Chapter One:

    Introduction

  • Chapter Two:

    Attracting High-Technology Companies and Enabling Their Growth

  • Chapter Three:

    Attracting and Retaining People

  • Chapter Four:

    Financing

  • Chapter Five:

    Priorities, Ease of Implementation, and Sequencing

  • Chapter Six:

    Indicators of Innovation

  • Appendix

    Contents of Creating an Innovation System for Knowledge City

This project was sponsored by the Guangzhou Development District and was conducted in the Environment, Energy, and Economic Development Program within RAND Infrastructure, Safety, and Environment.

This report is part of the RAND Corporation monograph series. RAND monographs present major research findings that address the challenges facing the public and private sectors. All RAND monographs undergo rigorous peer review to ensure high standards for research quality and objectivity.

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