Education Now! takes a look at the role of government and science in shaping the entrepreneurial spirit of the start-up hotspots in India and China———

By Tarun Khanna (professor at Harvard Business School and Director at South Asia Institute)

Last year, I immersed myself in the entrepreneurial hotspots of Shenzhen and Bengaluru, so here are some comparisons. Shenzhen is the most laissezfaire part of China. It’s part of Guangdong province, which, as a coastal province in southern China, is already more liberal than the northern ones. But it’s even more so: Shenzhen doesn’t pay much attention to its provincial government, let alone to far-away Beijing. One way to think of restrictions in Shenzhen is there’s probably a set of things that you cannot do, anything else goes. The result is that there isn’t much interference. It’s easy to do business in Shenzhen. Bengaluru follows the more bureaucratic approach of rules and regulations, closer to the list-of-things-you-can-do-other-thingslikely-are-forbidden approach. It has improved over time, but still has some way to go, resulting in continued irritation to entrepreneurs. There’s also an obvious way in which the government has contributed in Shenzhen that is utterly missing in Bengaluru: the presence of amazing physical infrastructure (even if it is aesthetically unimaginative). In Shenzhen this has facilitated the build-up of massive manufacturing facilities. For example, the empty apartments in some places mean that rent-subsidised quarters are often offered to those who set up shop in Shenzhen as an inducement. Bengaluru has the opposite problem: perpetual traffic jams, insufficient and expensive housing, and so on.

What’s clever is not everyone gets these subsidies. As one Chinese entrepreneur explained to me, these are offered to survivors. That is, you have to survive the rough and tumble of early stage activity, a period of high mortality for start-ups anywhere, to prove your mettle enough to qualify. This sort of principle means that one successfully avoids various forms of corruption associated with the somewhat centralised handouts of subsidies and freebies. Let me turn to the potential for science in start-up activity. The stock of raw scientific insight might well be greater in Bengaluru than in Shenzhen. Bengaluru has pure research in the Indian Institute of Science, presence of some of India’s best space- and satellite-related science and has capitalised on institutes of learning in southern India. Shenzhen has its excellent local university, but the science density did not seem to be as great. Neighbouring Hong Kong has fabulous science in several fields, but the political barriers between these proximate cities are much too high to allow for free-flowing ideas across the Hong Kong-mainland China border. Lest people in Bengaluru celebrate this, let me say that it’s possible for them to do much better with the science at their fingertips. There are poor linkages between the universities in Bengaluru to both established industry and the start-up ecosystem. Lastly, the density of talent seemed greater to me in Shenzhen. In Bengaluru, there are clusters in Koramangla and Whitefield and so on, but Shenzhen seemed like one giant cluster. The entire city is consumed by start-ups interspersed with manufacturing plants, with deal-making intense in many locales. One entrepreneur described it to me thus: “Talent flows like water here”, from one entity to the other. The density has translated into a faster average pace; it’s harder for laggards to survive in Shenzhen. So those disinclined to deal with the pace and the raw and naked ambition simply don’t come to Shenzhen, or just leave. There is a sorting of the talent pool, with the risk-lovers gravitating to Shenzhen, at a scale that you don’t yet see in Bengaluru.

 

The writer is a professor at Harvard Business School and Director at South Asia Institute

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