China’s Ministry of Education estimates that one-quarter of the 700,000 students who left China between 1978 and 2003 have now returned. In January 2010, the National Science Foundation ranked China second behind the U.S. in terms of the number of peer-reviewed publications the country released about the biomedical sciences. In 2007, China reportedly had approximately 200 government-funded biotechnology laboratories and more than 30,000 R&D staff in addition to the more than 500 biotech companies that employ 50,000 staff.

The impact that the migration of talent is having on life sciences companies’ ability to innovate and differentiate themselves worldwide is a topic of constant concern. Of particular interest are the increasing flows between the U.S. and China stemming from China’s “1,000-Talents Scheme” and similar initiatives at the local level. These schemes were specifically designed to help the country become a world leader in innovation, making incentives for people who are among the top 10 practitioners in their field to return to China in the next decade. Anecdotal evidence suggests that this talent draw is actively reaching into the private sector as well. Meanwhile, the nation continues to build new institutions of higher education to produce significant quantities of highly trained scientists and engineers.

In September 2010, we informally polled executives from pharmaceutical, biotech, medical devices and diagnostics, and healthcare services organizations in the U.S. and China about these schemes to lure top talent. Senior professionals contributed their opinions by taking a short online survey. I’ll summarize and provide perspectives on the feedback that we gathered and what it means for the life sciences industry.

Will Innovating China ImpedeProgress in the U.S.?

It is not surprising that a country with a population the size of China’s aspires to service its local markets’ growing need for healthcare services, medical devices, drugs, and so forth. In fact, it is natural for China to take measures to do so as quickly as possible, and the government’s programs to lure talent back make perfect sense in this context.

The question is: how much will China’s internal growth impact what happens in the U.S. over the short to medium term? One way to glean the answer is to look at the current state of China’s healthcare system and where is it best poised to truly make an impact. According to several of the executives who provided feedback, China’s programs to develop and attract top talent do not pose a significant threat to U.S.-based life sciences companies in the next decade, but many think they will significantly contribute to making China a truly powerful industry innovator, especially in the areas of drug development, medical devices and diagnostics, drug discovery and health services. This sentiment, coupled with the Chinese government’s significant subsidization of healthcare infrastructure, may indeed have strong, positive implications for China’s leadership position in the field.

Western and other developed life sciences markets are clearly not going away any time soon. Although these markets will no doubt grow less quickly than China’s in the immediate term, it would be surprising if China’s expansion were to severely handicap their growth over the next 10 to 15 years – especially given the fact that many of the new innovators in China’s life sciences arena have been operating for fewer than 10 years. It is therefore unrealistic to think that they will be able to grow these sectors overnight, especially on a global scale.

The fact is that excellence across the entire R&D continuum cannot flourish in China overnight. Investments will necessarily be focused on niche areas that can develop more quickly in China than elsewhere. Development and production businesses that rely on inexpensive labor, for example, beg to be built in China right now. Life sciences companies need to identify their strongest competencies within R&D that will take the longest to migrate out of the U.S. and sharpen their focus on them. It can be expected that much of the primary decision-making around drug discovery and development, as well as the related core infrastructure, will remain in the U.S. and other western countries for at least another 15 years.

In addition to the time it takes to lay the foundation for a fully functioning life sciences ecosystem, there are some inherent and perceived impediments to China’s ability to innovate quickly. The top systemic obstruction today is China’s hierarchic business and research culture, which is seen as impeding true creativity across the industry. Closely related to this point are ongoing concerns over relatively high levels of corruption and fraud in China’s academic institutions, along with its relatively weak commitment to enforcing intellectual property rights protection. In addition, despite the tremendous levels of support and funding from the Central Government, executives report that inconsistencies remain in terms of how that support is distributed at the local and academic levels. Finally, while the sheer number of students coming out of China’s top institutions is impressive, executives doubt whether quantity will match quality in terms of developing talent that appreciates “the big picture” and can truly make China a world-class center of innovation.

The Impact of the “Brain Drain” on Life Sciences Organizations’ Talent Strategies

It has been our experience that people at the Ph.D. level or with significant expertise will not move abroad for new opportunities without looking carefully at the overall attractiveness of what they are going back to. We primarily expect to see the continued departure of entrepreneurially minded talent heading to China to start new businesses. The executives we received feedback from cited two top factors luring talent back today: the increased availability of funding for research in science and technology in China compared to the U.S., together with the ability to work on more forward-looking projects in China.From a life sciences leadership perspective, however, it may take as long as 20 years before enough people with tangible experience in building infrastructure, discovering and developing new drugs – or building significant shareholder value – have moved to China in order to be the managerial heart and soul of fully integrated, Chinese-based companies.

Based on the factors we have mentioned, the top hiring issues in the U.S. and China today are:

Meanwhile, finding people with a global viewpoint to embrace and manage the dynamic changes happening in places like China will remain an issue for U.S.-based life sciences companies. While organizations will continue to find well-rounded, entrepreneurially-minded people with a proven ability to adapt to new markets and situations amongst the pool of talent that has studied abroad, taken job rotations in other western countries, or worked on special projects in developing markets, when it comes to building teams in China, this experience may not be enough.

Interestingly, the hiring needs of up-and-coming Chinese organizations are very similar to those of the early stage companies we work with in the U.S. Their focus will inherently be on the here and now rather than the world beyond, andtheir boards and chief executive officers are acutely aware that the need to find the right talent at the right time won’t subside during the early years. This being the case, nascent businesses must recognize the need to be nimble and sometimes take a risk in recruiting someone with more modest experience, but with ample intelligence, creativity and drive, to take the helm.

It is reasonable to expect that highly motivated and entrepreneurial executives like these may be able to execute quite successfully and eventually emerge as world-class managers in China. Along the way, they can help to change mindsets by encouraging innovation and valuing creativity rather than simply “achieving minimum targets,” which is often viewed as the acceptable benchmark for local and foreign-owned life sciences companies in China.

Even though the full impact of China’s “1,000 Talents” scheme remains to be seen, the prevailing opinion is that similar programs should be designed and implemented to keep foreign-born talent in the U.S., and that such programs should be created by the life sciences industry at large. While most agree that the U.S. has a significant enough lead in R&D to remain an industry leader for at least the next decade, there is no question that China’s momentum will continue to grow.

Rather than purely focusing on retaining foreign and other talent, the industry needs to invest in developing capabilities that will enable life sciences professionals in the U.S. to continue to adapt with speed and global sensitivity to the ever-changing business landscape.

Erik Lundh heads the San Francisco office of J. Robert Scott,a global boutique executive search firm with offices in Boston, Hong Kong, New York, London, San Francisco, Singapore and Shanghai. He can be reached at [email protected].