Tag: technology transfer

OM in the News: Is What’s Good for GE Good for America?

Remember the famous 1953 quote before Congress–actually it was a misquote– by the president of General Motors: “What’s good for GM is good for the country”? That remark was just rephrased to GE’s CEO, Jeff Immelt, in a question by a Wall Street Journal (Sept. 30,2011) reporter under the headline “China Venture is Good for GE but Is It Good for U.S.?”  Immelt’s edgy response: “I’m done”.

The basic question is whether the U.S. can compete in China without giving away the store.  The Journal asks: “What’s to keep GE’s new avionics joint venture with China from transferring the best of U.S. technology abroad, empowering a new set of Chinese companies to challenge U.S. aircraft makers?” After all, avionics–the “brains” on an airplane–are at the pinnacle of American know-how. It’s where the U.S. is still highly competitive and it’s technology that China covets.

GE says it has built protection into the transfer of technology. But one Congressman says: “To suggest there are going to be firewalls that will stop this technology from going to the Chinese military is approaching laughable”. This is not, of course, the first case of industrial companies striking difficult bargains with Chinese state-owned  firms in exchange for access to the growing market. Siemens earlier joint venture in high-speed rail resulted in direct competition from Chinese firms that borrowed its technology.  China’s industrial strategy has been explicit about “metabolizing” foreign technology and making it China’s own.

“We’ve been passive in deciding how to deal with China’s aggressive industrial policies”, says a former Commerce Department official. Adds a China expert: “It’s unclear whether anyone in the U.S. government took a look at the GE deal in terms of U.S. competitiveness–the future of the aviation industry 10 or 20 years out”.

Discussion questions:

1. Make the case for and against GE’s joint venture.

2. Should the government play a more active role  to protect  Boeing from China’s planned passenger jet that will use GE avionics?

OM in the News: GE’s Dangerous Game in China

It was just 2 months ago that our blog  Planes, Trains, and Drones–China’s Reverse Engineering Controversy  pointed out the costs and dangers of  sharing technology and trade secrets with China.  American, European, and Israeli firms have all learned that the short-term profits from chasing the lucrative markets in China have longer-term negative implications when Chinese companies beat them at their own game by making the same products cheaper, if not better. But as one who has served on the board of a publicly- traded (NASDAQ) manufacturer, I am well aware of the quarterly and annual pressures from shareholders who want immediate returns and profits. What US firm takes a 20- or 50-year view of  global strategy?

With the Chinese President touring the US this week, the risk and reward strategy has no better example than GEs decision to share its  airplane electronics and engines with a state-owned Chinese partner, Avic, for the new C919 jetliner. (See Ch.5’s discussion of  joint ventures and alliances).  The New York Times (Jan.18,2011) reports, “As China strives for leadership in the world’s most advanced technologies, it sees commercial jetliners…as a top prize. The Times adds, “GE will be sharing its most sophisticated airplane electronics, including some of the same technology  used in Boeing’s new state-of-the-art 787 Dreamliner”.

Neither Boeing nor Airbus are thrilled to see GE, one of their major suppliers, helping the Chinese so much. But both firms have already opened their own joint plane and parts factories in China. “Boeing has opted to accept the reality of both partnering and competing with China”, says the firm’s CEO.

 The VP of another aviation firm, Rockwell Collins, adds, “his employees often ask whether the company is trading its future for immediate sales in China… It comes down to who can innovate faster”.

Discussion questions:

1.What are the benefits and dangers of joint technology ventures with Chinese firms?

2. Where does China view itself  in 20 years in terms of manufacturing?