Mayor Xia, distinguished representatives from the Dalian municipal government and party organization, honored guests, ladies and gentlemen, it is indeed a rare honor today for me to stand in front of such a prestigious audience to offer some remarks appropriate to the importance of this occasion. I want to specifically talk to you about the increasingly central role being played by innovation in the world today and how fortunate we are to live in a period in history dominated by remarkable advances in science and technology. Even as I speak, tremendous advances are being made in medicine, in the development of new materials, in the ways we communicate, and in our ability to process, capture, store and transmit information. It is indeed an exciting time to be alive.

Recently, I had the chance to spend time with executives from several multinational firms, many of whom you would recognize as being among the exemplars of technological prowess. These companies, through their sustained investments in R&D, infrastructure and human resources are helping to re-define the frontiers of knowledge. Leveraging their alliances, acquisitions, and cooperative ventures as well as direct investments, these firms are creating a new architecture of innovation. Each one of them has become steadily embedded in a broad spectrum of diverse knowledge networks that transcend borders and cultures. For them, globalization has helped to shape an entirely new paradigm for innovation that is distinguished by its emphasis on flexibility, agility, speed, and new business models.

Listening to these firms talk about their future activities and plans is to look into a crystal ball and see what lies ahead over the next several decades in terms of economic competition, international cooperation, and scientific progress. Most interesting, however, is that for these leading-edge firms, at the core of their vision for the future is, first and foremost, talent…high end talent. When asked about their most demanding challenges in this new era of rapid innovation, these companies all talk about the continuous need to find “the best people” wherever they may be all over the world. Competition for high quality talent has become one of the key features of corporate strategy in the 21st century. And, not only must these firms identify the right people, but they also must nurture and cultivate them, incentivize and reward them, and continue to motivate and retain them to ensure continuity in the production of new ideas and concepts.

Along with this emphasis on talent is a related development that should not be ignored, namely, the fact that we are seeing new types of organizational structures and systems emerge to harness and accommodate talent. Members of various knowledge networks or teams are no longer geographically co-located and yet they are able to communicate and work together in an increasingly seamless manner with high levels of efficiency and effectiveness. Advances in video conferencing, supported by the expand use of the Internet and recent progress in the speed of communications technologies are enabling research to be coordinated across time and space with fewer hassles and greater comfort, even when involving work across different cultures. These new organizational configurations are leading to a real decline in bureaucracy as the hierarchy of the past is giving way to flatter organizational designs. Predictions are that because of the impact of technology on the workplace, not only is the way we work changing, but also the number of people needed will be sharply reduced as intelligent machines drive advances in productivity and reduce down time due to problems and failures.

Ironically, as the role of talent has increased, there have been new pressures for dramatic change in the human resource function in all types of organizations. The HR function was created at a time when people worked from 9 to 5, five days a week, and did not have the benefit of the IT, communications and transportation revolutions. In the future, we can expect to see new types of HR departments emerge that are more consistent with a mobile workforce, especially as it concerns the management of knowledge workers—who steadily will be called upon to manage themselves. I recall a recent TV commercial in the US, where an executive from Lucent, the American telecommunications equipment company, is sitting on a lounge chair near his swimming pool working at his home in sunny Florida with a laptop computer, a cell phone, and a small video camera as his legs and feet get cooled off soaking in the water. Whether it is working from home or a hotel room or a mobile office, we are seeing an entirely new set of work arrangements coming into play.

None of this is meant to deny or downplay the role of entrepreneurial individuals who remain a central feature of the innovation process. The “Economist” magazine recently gave out its annual innovation awards in seven categories for 2005. According to the Economist, innovation depends, in the final analysis, on those creative individuals “who dream up new ideas and then turn them into reality.” Among the seven awards, there were some interesting stories. In bioscience, the award was given to the two persons that drove the development of recombinant DNA technology, which allows genetic material from two sources to be combined. The two scientists that developed recombinant DNA, actually got the idea while eating two different types sandwiches while attending a conference in Hawaii. Another award was given to the iPod team at Apple Computer for developing the digital music player. When the iPod was first introduced in October 2001, it was widely criticized. One commentator wrote, “Who would buy such an expensive device” and “why would anyone want to compete with Sony?” Today, the iPod as become a global product with global demand. This shows that technological entrepreneurship comes in many forms and it is a rich array of sources that makes the innovation process work best.

As we sit here in Dalian, we may rightly ask, how will Dalian join the game of global innovation? What does Dalian have in terms of specialized resources and human talent that will afford it an opportunity to be part of the new knowledge networks that are redefining the face of competition? Is there a “culture of creativity” at both the macro and micro levels that is emerging in this important coastal city in Liaoning province? Will Dalian become one of the technological leaders in the Chinese economy? What needs to be done in Dalian to bring about more sustained innovation or, at the very least, attract individuals of great talent and promise to make Dalian the focal point for their support, financing, collaboration, etc.

I don't know about my foreign colleagues here today, but I do know that each time I come to Dalian I continue to marvel at the gains this city has made. The signs of physical progress are all around—a modern architecture, a clean environment, and a good transportation infrastructure. It is always exciting to be in Dalian with its huge upside potential. But, unfortunately, Dalian cannot become complacent, nor can it rest on past successes. As I am sure Mayor Xia and his colleagues realize everyday, Dalian cannot afford to rest for one minute in this world of rapid innovation. All around the globe, innovation continues to proceed full speed ahead, and even where innovation may be slowing down in some parts of the world, there are new centers emerging in other parts of the globe. Dalian is facing increasingly tough competition at home and abroad. What are its options and choices as it seeks to carve our a path for itself?

There is little choice but for Dalian to play the so-called “innovation card.” And that means being innovative itself. Simply stated, Dalian must redefine is economic and technological trajectory. This is not simply about benchmarking or adopting best practices. Michael Porter, the well-known expert on global competition, has said that competition is about winning, not just achieving what your competition can do. It is about being different. Dalian must break the mould and seize upon a future where it can alter the rules of the game. This is a tall order, but an achievable one. At a minimum, this means attracting the best talent from all around the world. Dalian must become a talent incubator.

In another often quoted article by Michael Porter and Scott Stern published in MIT's Sloan Management Review, the two authors talk about the critical role of location in helping to drive innovation. They suggest that the most strategic role for government is not to subsidize R&D for enterprises, but rather to improve the nature of the innovation environment. Accordingly, in contrast to most studies which focus on the so-called “internal” dimensions of innovation, Porter and Stern suggest that it is the external factors that often matter as much, if not more, in explaining the success of innovative activity. The two authors advise companies—at home and abroad-- to locate R&D investment and technology commercialization activities in environments with strong innovative capacity. This capacity includes 1)reduced communication costs, 2)open access to critical technical resources and capital, 3)high availability of strong research universities and technical personnel, and 4)dynamic links with state-of-the-art, highly sophisticated customers who will help to drive the demand for innovation to the next level on a sustained basis. With this framework in mind, Dalian's goal should be to become a preferred location for innovative activity.

As the 23 recipients of the XingHai Award stand here today, we all remain committed to helping Dalian seize this critical moment in time….to define and create a different road that breaks down old barriers, alters traditional ways of thinking, and changes the previous ways of doing things, where relevant. I believe Mayor Xia has set the right tone with his leadership and vision for the city. Now, all the required parts and policies must fall into place. I know I share the optimism of my foreign colleagues in saying that we share a very positive perspective about Dalian and its future…..that despite the growing demands from the world of innovation, Dalian will be successful in meeting this challenge.

On behalf of everyone, I want to thank Mayor Xia and all the people of Dalian for their friendship, for their warmth, and for this special honor which you have given to us. We all share your hopes and dreams for much success and prosperity in the years ahead. Thank you/

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