Innovation Policy in China

by

Erik Baark

• LAST REVIEWED: 31 July 2019
• LAST MODIFIED: 31 July 2019
• DOI: 10.1093/obo/9780199920082-0175

Introduction

The Chinese government places high priority on promoting innovation in the country, viewing it as an essential element of economic and social modernization. From an early period of reliance on import of technology from the Soviet Union in the 1950s, China moved to a period of self-reliance and “reverse engineering” in the 1960s, followed by the Open Door phase since the 1980s, where the primary goal was to catch up with the most advanced countries in the world. Since 2006, China has increasingly sought to develop its own advanced technology and become an “innovation superpower.” In the following article on innovation, it is important to be aware of the fact that Chinese policymakers and academics have traditionally seen this field as part of science and technology policy, which emphasized scientific research as a vital element in the development of new technology. However, this approach tended to limit policymakers’ concern to support for research institutes and ignored the crucial role that enterprises could play in developing and implementing technology. This included the delicate balance between transfer of overseas technology and the independent development of technology by Chinese organizations. Therefore, concepts of innovation and of research and development have become very popular in China in recent decades, and policies promoting a Chinese national innovation system are prominent in government statements as well as in the academic literature. This article will focus on policies that the Chinese government has pursued to promote or regulate technology and innovation, including the controversial policy of promoting indigenous innovation. In addition, it addresses the literature on the protection of intellectual property rights, human resources for innovation, development of high-tech industries and high-tech parks, and university-industry linkages.

General Overviews

For a comprehensive introduction to the key policy issues, Organisation for Economic Cooperation and Development 2008 is an analysis that in many ways provide a benchmark for research on science, technology, and innovation in China and was designed to assist the Chinese leadership to formulate policies for the following decade. Overviews of innovation in China have frequently been published in the form of anthologies covering various aspects of innovation or innovation in specific sectors of the economy. For example, Zhou, et al. 2016 is a collection of papers on innovation in various sectors in China that covers both general issues such as analysis of the evolution of Chinese State Policies on Innovation, as well as specific sectors such as automobiles, high-speed trains, and semiconductors. Song, et al. 2017 is a similar anthology that contains chapters that review the role of human capital, innovation, and technological change in affecting the pattern of growth and general development of the Chinese economy. Another collection of papers is Lewin, et al. 2016, which includes critical reviews of fundamental cultural and institutional structures that have promoted or presented barriers to innovation in China. Appelbaum, et al. 2018 evaluates China’s state-led approach to innovation policy and its successes and failures. In Zhang and Yu 2015, the recent emphasis on innovation in China is illustrated with case studies of innovative firms. Yip and McKern 2016 surveys Chinese policies for the promotion of innovation and successful case studies from a business management perspective.

• Appelbaum, Richard P., Cong Cao, Xueying Han, Rachel Parker, and Denis Simon. Innovation in China: Challenging the Global Science and Technology System. Hoboken, NJ: Wiley, 2018.

  China is in the midst of transitioning from a manufacturing-based economy to one driven by innovation and knowledge. This book presents a recent analysis of China’s state-led approach to science and technology and an evaluation of its successes and failures in selected sectors. The authors argue that this approach might not yield the same level of progress going forward if China does not address serious institutional, organizational, and cultural obstacles.

• Breznitz, Dan, and Michael Murphree. Run of the Red Queen: Government, Innovation, Globalization, and Economic Growth in China. New Haven, CT: Yale University Press, 2011.

  In this interesting study of the Chinese experience of using technological innovation to catch up with advanced industrialized countries, Breznitz and Murphree argue that while central government policies aimed to generate new to the world technologies, Chinese local government policies for the information technology sector in Beijing, Shanghai, and Shenzhen successfully encouraged of the ability to assimilate new technology and undertake incremental innovation to gain competitiveness.

• Fu Xiaolan. China’s Path to Innovation. Cambridge, UK: Cambridge University Press, 2015.

  The aim of this study is to show how China can sustain its rapid economic development by strengthening its indigenous innovative capability. Using large panel datasets and in-depth industry case studies, it analyzes the motivations, sources, obstacles, and consequences of China’s technological upgrading. Particularly interesting are chapters that demonstrate the comparative successes and challenges of building technological capabilities in solar panels and the effects of open innovation approach in China.

• Lewin, Arie, Martin Kenney, and Johann Peter Mumann, eds. China’s Innovation Challenge: Overcoming the Middle Income Trap. Cambridge, UK: Cambridge University Press, 2016.

  The first part of this book contains chapters that examine the economic, political, and social context of China’s development and the consequences for avoiding the “middle-income trap” in the future. A chapter on the emergence of the Chinese patent system shows the influence of institutional and political priorities. Other chapters provide in-depth studies of cultural factors affecting innovation and the importance of Chinese cases for cross-cultural business management.

• Organisation for Economic Cooperation and Development. OECD Reviews of Innovation Policy: China 2008. Paris: OECD Publishing, 2008.

  This report assesses the status of China’s national innovation system and policies in the early 2000s, and recommends improvements required in both the policy and institutional environments for China to succeed in promoting innovation through a market-based approach.

• Song, Ligang, Ross Garnaut, Cai Fang, and Lauren Johnston, eds. China’s New Sources of Economic Growth: Human Capital, Innovation and Technological Change. Acton, Australia: Australian National University Press, 2017.

  This book contains a broad range of chapters that survey the role of human capital, innovation, and technological change in affecting the pattern of growth and general development of the Chinese economy. Papers explore recent macroeconomic developments, alongside trends in education and innovation and discusses how structural change is preparing the economy for a more advanced set of economic growth drivers.

• Yip, George S., and Bruce McKern. China’s Next Strategic Advantage: From Imitation to Innovation. Cambridge, MA: MIT Press, 2016.

  In this book, Yip and McKern identify enablers of innovation on both the supply and demand side. The analysis is illustrated with a large number of case studies, together with a range of indicators for the emerging innovative capabilities of Chinese firms. The book is particularly useful for companies running business in China and suggests that to be successful in China’s market, one needs to be embedded in China’s innovation ecosystem.

• Zhang Yingying and Yu Zhou, eds. The Source of Innovation in China: Highly Innovative Systems. Houndmills, UK: Palgrave Macmillan, 2015.

  This anthology of thematic papers and case studies provides new insights into the strategic change taking place in some of China’s leading high-technology firms. The authors propose that Chinese firms are currently in the process of leaving strategies and management based on competitive advantages derived from low-cost labor to a new strategic direction relying increasingly on research and development and innovation. These arguments are reinforced with detailed case studies and survey of industrial firms in China.

• Zhou, Yu, William Lazonick, and Yifei Sun, eds. China as an Innovation Nation. Oxford: Oxford University Press, 2016.

  An anthology of papers that discuss the achievements of the Chinese policies to promote innovation, particularly in terms of the policy on “technology for market access” implemented for most foreign direct investment. In some sectors state-led efforts were successful in acquiring advanced technology and create indigenous innovation capabilities (such as high-speed railways), while in other sectors (such as automobiles) state-led efforts failed to move beyond imported technology imports and continued to be dependent of foreign designs.