The hottest gig in China is Microsoft Research Asia (MSRA), headquartered in Beijing, which gets at least 10,000 résumés every month. But this R&D lab isn't just a magnet for China's top technical talent. Since its founding in 1998, MSRA has had a significant impact on Microsoft's global technology strategy.

Nearly 100 technologies developed at MSRA have been transferred to Microsoft products ? the largest number among the research arms outside of Redmond.

"This is a new kind of manufacturing in China. Not just shoes, socks, baby strollers. Now we manufacture MIT students, papers and software," says Harry Shum, former head of MSRA, in the book Guanxi (the Art of Relationships): Microsoft, China and Bill Gates' Plan to Win the Road Ahead.

Because of the high-caliber talent in China, Microsoft has ambitious goals for MSRA: (1) Advance the state of the art in computer science; (2) Incubate disruptive technologies; and (3) Act as a think tank for long-term corporate strategy. Because of its focus on user interfaces, wireless networks, multimedia, graphics and search, MSRA has also become increasingly vital in the fight against key competitors like Google, Sony and Nokia.

How did China become such an important part of Microsoft's global R&D strategy and what lessons can be applied to your business?

Nathan Myhrvold, Microsoft's first chief technology officer, observed early on that "the key raw material in research is smart people, and you'll never get all the smart people to come to any one place. Well, if you can't get them all to come to Redmond, you have to go to them." As a result, in 1998 Microsoft took what looked like a huge gamble and launched the first true foreign-backed research and development center in China.

How did they do it?

First, Microsoft chose a native Chinese speaker who could command the attention and respect of government and other key stakeholders. Next, the company carefully picked a location for its China lab. While Shanghai offered a more open and dynamic commercial environment, the central government resides in Beijing. Also, two key sources of talent, Beijing University and Tsinghua University, were there. To build momentum, Microsoft started by hiring Chinese rising stars in the U.S. who loved China and wanted to play a role in its development.

With a foundation laid, Microsoft established its guanxi wang, or network of relationships. Specifically, senior executives from Bill Gates down met with and sought the opinions of a myriad of government officials and academics, even when it might have appeared that their views were not directly relevant. This investment in social capital created a reservoir of goodwill and allowed resistance to be quietly addressed before positions became public and intractable.

Next, recognizing the importance both the government and the Chinese people attached to the development of technical talent, Microsoft devoted substantial resources to support this goal. For example, it organized an annual conference for world-renowned scientists to interact with Chinese academics and students. It also provided numerous internship opportunities and supported projects for Chinese researchers.

Abstracting from Microsoft's success in China, any business seeking to capitalize on that country's increasingly formidable R&D capabilities should identify someone to lead the R&D initiative who can speak Chinese and operate deftly in that cultural environment. He or she must also have the personality as well as the right professional credentials to win the friendship and command the respect of key institutional stakeholders.

Next, provide ample face-time opportunities with government officials for your top executives to create enough social capital. Finally, be sure to invest resources in a cause important to the Chinese government that also plays well to the masses. Then, make and honor your commitments to advance that cause. If you can do this, you too can win with one of the most potent productive forces in the 21st century.