Development, Justice, and Technology Transfer in China: The Case of HP and Legend

Abstract

In 1978, 16 months after Mao Zedong’s death, China’s new leader, Deng Xiaoping, introduced market reforms and an “opening” to the West that allowed the US company Hewlett-Packard (HP) to enter China in 1981. Shortly thereafter, HP began a partnership with the Chinese company Legend Computer (now Lenovo), through which HP transferred its technology in four main areas: (1) product technology, (2) business model, (3) management practices, and (4) strategic planning processes. This technology transfer seems to be a “just exchange” in that HP received access to China’s market while China received key managerial, marketing, and product technologies. Although multinationals are often criticized for their dealings with developing nations, the HP–Legend case provides an illustration of how a company from an industrialized nation can deal justly with a developing nation and assist in advancing its development. The transfer of technology from HP to Legend was facilitated by several factors, including HP’s historical willingness to help startups, its strategic posture, a favorable local environment, Legend’s recognition of its own needs, its willingness to learn from a foreign company, and the incentives to share technology that the Chinese government provided.