How IP challenges in China stem from intercultural differences

July 23rd, 2012

Today’s Forbes features an excellent article on Piracy and Intellectual Property (IP) in China: in China, Why Piracy is Here to Stay.

Understanding why piracy is here to stay does not necessary make it less costly or frustrating for International companies, but it can be helpful to understand that this practice stems from a several thousand year old mindset. And to learn what is and is not effective in countering it (ie. the example of Microsoft’s ads).

One of the most commonly examined element of intercultural theory is that of the Collective vs. Independent nature of a society.   European and especially North American cultures exhibit a strongly Independent business and social structure.  The rights of the individual (person or company) override the collective, and are protected as such. China exhibits one of the most Collective societies in the world – where the well-being of the group trumps the rights of the individual. We can’t call one or the other way bad/good; or right/wrong, it’s simply how these diverse societies have evolved over hundreds and thousands of years.  And it’s difficult to erase thousands of years of behaviour based on a Collective mindset with an advertising campaign.

Piracy goes back to the China world view that individual rights don’t matter.  The courts have never evolved to protect innovative individuals. There is still very much the ethos that economic growth has to be managed, so individual and intellectual property, where the spoils go to one entity or one person, is not a cultural value, says Tom Doctoroff of J. Walter Thompson

I’ve heard it said in China, that brands don’t matter.  I completely disagree and feel that Chinese have a keen understanding of the value of brands and the face they can provide.  It makes sense.  Imagine a rural factory in the hinterland of China that makes knock off MP3 players.  They notice that if they make red ones, they sell for 50% more.  Then, they notice that if they sell white ones with a label that says IPOD and a picture of a fruit they can sell them for 200% more.  It makes perfect sense.

In the opinion of many, unfortunately for China, the ongoing abuse of IP may provide short term revenue but hurts China in the long run.  With rising labour costs and increasing competition from cheaper countries, China as a whole wishes to evolve from being the world’s factory to a more innovative economy.  However, lacking comprehensive and consistent enforcement of IP international laws not only hurts international corporations but also fledgling Chinese innovators. For every conspicuous black-market DVD stand bust I’ve seen in China, I’ve seen thousands operate with complete impunity. New domestic innovation in China will always be threatened by a lack of protection, unfortunately stifling the evolution of its economy.

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