To summarize, entrepreneurial capitalism is the system we believe is most conducive to radical innovation. But no advanced economy can survive only with entrepreneurs. Big firms remain essential to refine the radical innovations that entrepreneurs have a greater propensity to develop. One area for future research is the optimal mix of entrepreneurial and large firms.
But as you can read from the article, one of the disadvantages of big-firm capitalism is that firms in oligopolies can be lazy, living off their cash flow without innovating, and can leverage their power in one market into other markets, thereby stunting the growth of new technology and handicapping the entrepreneurs who could commercialize it. Here is a vivid example that shows large firm lacks of innovation. In China, Tencent is a famous Internet company established in 1998, the time that Internet industry began development in China.
At that time, there was an instant messaging computer program called ICQ, which was developed by Israel Company. As ICQ didn’t have Chinese version, so Tencent developed the software called QQ, which has the same function as ICQ dose and, most importantly, it has Chinese interface. It’s not difficult to imagine how popular it was at that time. So Tencent attracted more and more users by providing QQ software and related services. It’s so important to have as many users as possible for an Internet company cuz the number of users is the king in this industry.
So at this point, Tencent is the most successful Internet Company in China since it has the largest number of users. At 8 PM, Mar. 5th, 2010, Tencent announced that over 100 million users were communicating on QQ concurrently at that time. That is a huge number! However, it’s also the point where problems come. It seems that Tencent knows its strength clearly. What Tencent did in the past decade was nothing else but copy. If you list all the software that Tencent provides, you’ll find there is nothing original. Actually Tencent wants to set foot in every field related to Internet industry.
And Tencent realize its goal in the following way: S1 S2 S3 S4 Tencent’s software and service include almost everything related to internet industry, instant messaging software, online shopping, online payment, online game, online video, online music, search engine, portal, download software, social net work platform, browsers, micro blog (twitter), input method, Antivirus, dictionary, email, video player …… Among all the software and services provided (copied) by Tencent, only few of them surpass their models.
Even so, Tencent never stop coping others. What it wants to get is to take advantage of the number of users. For Tencent, it doesn’t matter if they can monopolize every field they tried. If Tencent could monopolize in one or two field that they tried, they will get enough profit. But, what Tencent did could really hurt the innovation ability of the country. On one hand, Tencent itself doesn’t innovate. On the other hand, Tencent’s copy strategy will stunt other’s innovation ability.
If you develop an attractive software or service, can you imagine what will happen if your product receive good reputation? Tencent will copy your idea and business mode and beat you with its huge number of users. So under this circumstance, those small size companies will become reluctant to innovate. As a result, our society’s innovation ability can be affected in the future. So if we want the optimal mix of entrepreneurial and large firms, we need to discuss this question first: How can governments ensure that the successful large firms will continue to innovate?