Can a firm have too much innovation to handle?

It happens. And that problem was the dominant issue for a small group of executives from Microsoft's Beijing research lab when they held a retreat in November 2002 at a spa in Zhuhai, not far from China's border with Macao. Relaxing in the outdoor hot springs, the group brainstormed a promising solution to a fundamental problem facing Microsoft and many other high-tech companies: how to move more innovations more swiftly and effectively from research to development to market. Their idea: a new type of organization designed to bridge the gap between "R" and "D" and in the process overcome many of the product development bottlenecks and geographic and cultural differences that impede today's global corporations.

Microsoft's Advanced Technology Center (ATC) opened in November 2003 with 20 employees and a couple of projects. By late last year, after receiving more than 30,000 résumés from around China and sparking keen demand among Microsoft's business divisions, it had around 100 employees, with some 17 major projects and scores of minor ones on its books; this year, the ATC is set to double in size. In the next few years, the center expects to be the key technology transfer point for a host of new products, from Web-search technologies to mobile applications and home entertainment systems. On the strength of these innovations, Hongjiang Zhang, the center's charter director, hopes to provide a powerful alternative to Microsoft's traditional strategy of creating products in the U.S., spiraling into Europe, and then adapting them for the Chinese market. "China is still emerging, but China is no longer just a follower," he says. "They are starting to lead."