Brian Yeung writes that the SAR's world-class universities, not the government, are best placed to foster the ecosystem needed for successful technology startups

The long-standing success of Silicon Valley is a stark contradiction of the belief that the government should take the lead in driving innovation in Hong Kong. Silicon Valley's operations are free of government interference. Instead, Stanford University has been a driving force behind many of the world's top high-tech companies that have deep roots in Silicon Valley. Examples include Google, Cisco and Yahoo, just to name a few.

So if we dismiss government involvement here, the question arises: Is there room for universities in Hong Kong to step up and foster innovation?

One way to achieve this is through university-industry partnerships. Ideally, such partnerships bring in royalty revenue for the university while industry benefits from the expertise of academia. For instance, last year royalties flowing into Stanford's Office of Technology Licensing amounted to a total of $108.6 million. Furthermore, potential patent earnings may also benefit a university, if properly negotiated.

In fact, university-industry partnerships have emerged as a global trend. Take the UK, for example - there was a 10 percent increase in volume in terms of university-industry partnerships between the academic years of 2012-13 and 2013-14. Last year Japanese telecom company NTT also funded a research project to develop cyber security technology with Tokyo's Waseda University. And there are many other examples across the globe.

Hong Kong takes pride in having some of the world's highest-ranked universities - with six tertiary institutions and 26 subjects included in the world's top 20 by this year's QS World University Rankings by Subject. But the low level of university-industry research collaboration is hampering Hong Kong innovation.

According to the Global Innovation Index 2014, Hong Kong ranks 10th among 143 economies surveyed. But it is no better than 20th in terms of university-industry research collaboration - lagging behind Singapore, Malaysia and Japan. As of the end of June 2015, only 273 (6 percent) of 4,617 projects supported by the Innovation and Technology Fund were university-industry collaborations.

In Hong Kong, Research and Development (R&D) and innovation expenditure in the private sector is actually on the rise, and companies are willing to collaborate with external partners.

Research by the Hong Kong Trade Development Council indicated that there was a total expenditure of $900 million on R&D in the private sector in 2013, an increase of 5.6 percent compared with the preceding year. Total innovation expenditure even hit the $2.07 billion mark. The research also suggested that, respectively, as many as 1,087 and 1,398 Hong Kong companies had engaged external partners in their R&D and technological innovation activities in the same year. Therefore, the only question that remains is whether universities are willing to work with industry.

As entrepreneurship is another ingredient that fuels innovation, universities can play a key role in grooming a new generation of entrepreneurs, especially among their students. One common practice in Hong Kong is organizing competitions, some of them in partnership with businesses such as the HSBC Asia Pacific Business Case Competition, ACCA Hong Kong Business Competition and so on. But the major stumbling block is the judging panel; many of its members are from academia or corporations and lack entrepreneurial experience. Despite this they remain entrusted with the task of "picking winners".

More importantly, we must always consider the downside - most startups fail. A study by Harvard Business School lecturer Shikhar Ghosh indicated that three out of four startups backed by venture capital in the US fail. Some researchers have even estimated the failure rate of startups to be as high as 90 percent. In other words, a real entrepreneur is not someone who writes a good business plan but the one who perseveres with his own idea through the highs and lows. To encourage entrepreneurial spirit, universities should find ways to change the risk-averse mentality of students. That is perpetuated by rewarding "winners" but neglecting "losers". What happened to the proven wisdom which says, "We learn more through failure than success"? When people commiserated with Thomas Edison over the failure of thousands of his experiments, he said, "I just found thousands of ways which wouldn't work!"

To foster innovation, universities can do more than teach entrepreneurship and collaborate with industry. Knowledge transfer and open data are equally critical to nurturing innovation. The global positioning system, which was once seen as a groundbreaking innovation, would not exist without access to data. While academic research gathers a huge amount of data, most information is behind a paywall even though many of these projects are backed by publicly funded research grants.

Hong Kong is not Silicon Valley but the Silicon Valley experience shows that the innovation ecosystem can flourish without strong government support. Despite all the above-mentioned challenges, Hong Kong is quickly catching up as a hub for innovation, as illustrated by the rise of R&D and innovation expenditure as well as the number of startups. If Hong Kong can harness its world-class universities, it will take our innovation ecosystem to the next level. It will also do wonders for our economy and create opportunities for our young people.

The author is a consultant on entrepreneurship and innovation. He organizes conferences and training programs for overseas executives and entrepreneurs in Hong Kong, Singapore and the mainland.

(HK Edition 09/09/2015 page8)