Earlier this week I caught up with two old friends with whom I had not spoken in a while.  To my surprise, both told me remarkably similar stories about what they had been doing for the past year.

The two individuals, who are experts in their respective fields (neither in energy storage), had each been invited to China by different quasi-public entities.  Their hosts told them that the host wanted to build an ambitious project (a large cellulosic ethanol plant in the case of one; a factory to manufacture specialty machinery in the case of the other) and that they had each been identified as an expert in their respective industry.  Both were invited to submit a business plan for developing the identified project to profitability and told that if their host liked their plan, it would hire the individual to execute it and give him equity in the project.  Each was instructed to identify and acquire in the West all the technology and intellectual property the project required.  The Chinese entity would pay for everything.

Hearing both stories independently, and on the same day, caused me to wonder whether something larger is going on.  If these stories reflect a coordinated program in China to acquire talent and technology in targeted industries, it is an interesting twist on the standard U.S. venture capital model (though it would be a model more familiar in the buy-out and BDC worlds).  Moreover, it is likely to be a very effective way for Chinese companies to identify and acquire the best U.S. technology in several sectors.  Assumptions that the Chinese are simply trying to steal American technology opportunistically may be outdated.  If Chinese companies are paying cash and buying talent as well as technology, the transfer of U.S. developed technology may be occurring faster and more legitimately than what has been assumed.

There is good cause to be concerned by the rapid transfer of U.S. technology to China, particularly when much of that technology has been developed, directly or indirectly, with U.S. taxpayer dollars.  Technology creates jobs and supports economic growth.  Technology that moves East will likely support more jobs and growth there than here.

As I have previously written, however, the United States is in the technology transfer business and has been in that business for some time.  As long as U.S. companies and the U.S. taxpayer are paid a fair price for technology, its transfer should be encouraged.  That is, in effect, the business that many U.S. companies are in.

The business model only works, however, if new innovation and new technologies are developed quickly in the United States and replace the technology that is transferred.  If the transfers are taking place more rapidly and in a more organized fashion than assumed, that places pressure on the model.  The faster the transfer, the faster U.S. companies must innovate new technologies to replace it.

All of this underscores the critical role that innovation, new technology and both public and private investment in research and development will play in the future of the American economy and in the ultimate viability of a domestic advanced battery industry.  The question of whether U.S. advanced battery companies and the U.S. government need to invest heavily in new energy storage technologies is not a close one.  As the pace of technology transfer increases, so must the pace of innovation.  For American industry, it is truly a case of innovate or die.

 

Photo by focus.com