Innovate or Die: How Hong Kong-owned Manufacturing Firms in China Can Survive and Thrive

Changes in the regulatory and business environment accompanying rapid development in Guangdong province threaten the survival of Hong Kong–owned manufacturers. Neither relocating elsewhere in China nor remaining in Guangdong is an attractive option for low-end, low-cost, highly polluting industries. A recent survey found that Hong Kong–owned firms that undertake process or product innovation or conduct R&D and collaborative innovation activities in China are more likely to survive the challenging business environment. The governments of Hong Kong and Guangdong should adopt policies that support innovation and work to develop a highly integrated regional innovation system that enables actors in all relevant sectors to work together effectively.