What do successful global companies really do to protect their intellectual property in China?


Intellectual property (IP) protection is the Number ONE challenge for multinational corporations operating in China. The US government reported that China accounted for nearly 80 percent of all IP thefts from US headquartered organizations in 2013. This is equivalent to $300bn in lost exports or the total US trade balance with all Asian nations combined. In a similar study done by the European Union, manufacturers reported that the loss of IP in China cost them 20 percent of their potential profits. The reality is that today no multinational corporation can afford to stay away from China and wait for local laws, regulations and property rights enforcement to reach more effective levels. The shift in the center of economic gravity towards China and the rapid rise in sophistication of Chinese consumers require businesses to go beyond effective IP protection for their existing products and services. In order to remain competitive, multinational corporations also have to develop mechanisms that enable them to shift some of their innovation capabilities to China for local innovation, all while minimizing the risk of losing critical know-how. To learn about how companies successfully manage the China IP protection challenge we conducted in-depth field research in 57 of the most successful multinational corporations (“See About the Research”). We identified nine highly effective IP protection practices, which together form a dynamic “Web of IP Protection.” We found that the “Web” allows a corporation to a) expand faster within China and across other emerging markets b) outperform local and foreign competitors and c) improve local and global innovativeness.

Together with Mary B. Teagarden

Research is published at MIT Sloan Management Review