The key challenge for the multinational companies in China was the protection of their Intellectual Property (IP). In 2013, China represented about 80% of all IP thefts from the U.S. -headquartered organizations, as said by the government of the U.S., and brought nearly $300 billion in lost business. The IP thefts in China have caused the decline in revenue by 20% for European companies.
The IP theft practices could be evidenced from available fake products in the markets, including automotive parts, aircraft parts, luxury goods, and toys. However, these illegal practices go beyond products to incorporate pirated production systems and complete business models. This major concern has put back various local companies that have the potential to expand through joint ventures with present multinational companies. The key medium of IP leakage is either the staff or the shared practices of multinational companies with domestic joint ventures or with partners in the supply chain. For foreign companies, such IP theft is an estimated risk worth taking. On the other hand, the unexpected IP leakage could cause dramatic impact on a company’s revenue, and could bring strong competitors either in the domestic market or international market. The authors, Mary B. Teagarden and Andreas Schotter, studied 50 different MNCs and concluded that basically there are nine practices for IP protection in China. Four of them focused on external and are defensive; while the remaining are internally focused and proactive. The authors integrally called them the “IP protection web” that helped the MNCs to (1) diversify into growing markets rapidly, including China; (2) enhance efficiency; (3) develop the innovative culture both at the domestic and international level. The trial and error is the basic tool used by most of the companies to secure their IP. The varying composition of IP risk demands for ongoing reconfiguration. Multinational companies now need to incorporate more refined responses and create new approaches to build loyalty, as the Chinese manufacturers turn out to be more handy at absorbing leaked IP
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