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For much of the last two decades, foreign innovation in China has been driven by competition among foreign firms and by imitative threats from local Chinese firms. However, over the last five years, many domestic Chinese firms are innovating unlike ever before. The ramifications of this transformation can be profound for foreign MNCs. Drawing upon more than 200 interviews with RD (2) China’s intellectual property regime has been strengthened; (3) Keeping advanced technology away from China comes with greater risks, but so does sharing it; (4) Innovation transaction costs can now jeopardize the lead; and (5) Time to market (TTM) of innovative products and services is more important than ever. In response to these challenges, we argue that foreign firms should manage R&D in four new ways.
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