The Transition from Imitation to Innovation: An Enquiry into China's Evolving Institutions and Firm Capabilities

11 Pages Posted: 12 Sep 2008

See all articles by Wendy Dobson

Wendy Dobson

University of Toronto - Rotman School of Management

A. Edward Safarian

University of Toronto - Joseph L. Rotman School of Management - Business Economics

Date Written: August 1, 2008

Abstract

How is the Chinese economy making the transition from imitation to innovation as the source of sustained long-term growth? We address this question using the evolutionary approach to growth in which institutions support technical advance and enterprises develop capabilities to learn and innovate. Growth is seen as a series of disequilibria in which obstacles to innovation such as outdated institutions and weak incentive systems can cause growth to slow. We review existing literatures on institutions and firm behavior in China and compare these findings with those of our survey of Chinese firms in 2006. Industry and firm studies in the literature show how productivity is rising because of firm entry and exit rather than the adoption of new technologies. A striking feature both of the studies in the literature and our survey is the increasing competitive pressures on firms that encourage learning. Our survey of privately owned small and medium enterprises in five high-tech industries in Zhejiang province found a market-based innovation system and evidence of much process and some product innovations. These enterprises respond to growing product competition and demanding customers with intensive internal learning, investment in R&D and a variety of international and research linkages.

Keywords: China, Technological capabilities of firms, Transition to innovation economy

JEL Classification: O12, O30, O53, P30

Suggested Citation

Dobson, Wendy and Safarian, A. Edward, The Transition from Imitation to Innovation: An Enquiry into China's Evolving Institutions and Firm Capabilities (August 1, 2008). Journal of Asian Economics, Vol. 19, No. 3, 2008, Available at SSRN: https://ssrn.com/abstract=1266320

Wendy Dobson (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-2451 (Phone)
N/A (Fax)

HOME PAGE: http://www.rotman.utoronto.ca/dobson/

A. Edward Safarian

University of Toronto - Joseph L. Rotman School of Management - Business Economics ( email )

Toronto, Ontario M5S 3E6
Canada

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