Replicating Silicon Valley? Law and Human Capital in the Making of China's Tech Startups

• Published in: Asian journal of comparative law Vol. 15; no. 2; pp. 334 - 362
• Main Author: LIN, Li-Wen
• Format: Journal Article
• Language: English
• Published: Cambridge, UK Cambridge University Press 01.12.2020
• Subjects: Capital markets; Comparative law; Compensation; Employees; Entrepreneurial finance; Equity; Foreign exchange; High tech industries; Human capital; Innovations; Intellectual property; Investments; Investments, Foreign; Labor market; Noncompetition agreements; Product development; Startups; Stock options; Valuation; Velocity; Venture capital; CHINA; Beijing China; Silicon Valley-California; United States > US; China
• ISSN: 2194-6078; 1932-0205
• DOI: 10.1017/asjcl.2020.15

The rise of China's tech companies in the global economy raises an urgent need to understand how China incubates its tech startups. China's tech startup ecosystem presents two puzzling legal arrangements for human capital in light of Silicon Valley's experience, the co-existence of enforceable non-compete agreements and the high-velocity labour market, and the common use of stock options with a buyback norm. This article delves into the peculiarities of China's legal and political institutions to resolve these legal puzzles. This article also speaks to a global policy debate about the replicability of Silicon Valley and the necessity of such replication. The Chinese experience offers opposite examples showing the replication complexity: replication yet with deformed practices, and non-replication yet with similar outcomes. The findings suggest that there is unlikely to be a one-size-fits-all model for creating an innovation economy.