Grasping knowledge in emerging markets: is this the case of Western pharmaceutical companies in China?

The traditional theory highlights the emerging issues related to the infringement of intellectual property rights of indigenous people by foreign multinational enterprises (MNE). By settling their branches in the developing world, MNEs are able to capture traditional knowledge, register patents based on such principles and incorporate them into their products. 1 The industrialized countries win in this game. What is the situation for China in the pharmaceutical sector, as for the Traditional Chinese Medicine (TCM) and the growing presence in the country of foreign pharmaceutical companies? Analyzing the Chinese context, this type of exploitation of traditional knowledge seems to have no place, for several reasons. Although China ranks among the emerging economies, it does not seem a developing country. In terms of economic growth, China holds many records in the world: from production, to exports, to import and foreign direct investments (FDI). China’s economic development model is outward-oriented: attracting FDI and pushing exports to leverage domestic growth. In any case, China can take advantage of an internal market of over 1.4 million people. Domestic consumption, in the future, could be the driver of a dynamic and long-lasting economic growth. China is self-sufficient and, in thisperspective, it could manage pharmaceutical sector development and the traditional medicine market as well. China may be able to produce the products required to meet the needs of its population regardless of the foreign pharmaceutical companies. In this context, however, it is important to understand how the Chinese government should act to foster internationalization and strengthen the position of Chinese companies within the pharmaceutical sector. Is it appropriate that the Chinese government invests and strengthens the pharmaceutical companies, through appropriate policies and economic structures, so that they remain independent enough to take advantage of the development of the internal market and of the protection of the rights related to TCM? Which is the best solution to protect the interests of the Chinese population in the pharmaceutical sector? These topics are addressed in this chapter. The chapter is divided into three parts. First, we outline the characteristics of the Chinese economic growth. In the second part, we analyze the domestic pharmaceutical market and its level of penetration by foreign multinational companies. Finally, we describe the situation of the TCM sector, to evaluate the actual position of Chinese as well as of foreign companies. Some final remarks close the work