Technological Innovation Policy in China: The Lessons, and the Necessary Changes Ahead

23 Pages Posted: 22 Jun 2016

See all articles by Xiaolan Fu

Xiaolan Fu

University of Oxford

Wing Thye Woo

University of California, Davis - Department of Economics

Jun Hou

Overseas Development Institute (ODI)

Date Written: February 29, 2016

Abstract

China has now moved considerably away from being an imitative latecomer to technology toward to being an innovation-driven economy. The key lessons from China’s experience are that (1) there is synergy between External Knowledge and Indigenous Innovation because the process of learning the tacit knowledge required in using the foreign technology fully is made easier by strong in-house R&D capability; (2) the open innovation approach is very important because it allows multiple driving forces – the state, the private sector and MNEs – with each playing a changing role over time; and (3) the commencement of foreign technology transfer and investment in indigenous innovation should go hand in hand. Without the numerous well-funded programs to build up the innovation infrastructure to increase the absorptive capacity of Chinese firms, foreign technology would have remained static technology embedded in imported machines and would not have strengthened indigenous technological capability. However, China could still end up in the middle-income trap, unless it undertakes a series of critical reforms in its innovation regime in order to keep moving up growth trajectories that are increasingly skill-intensive and technology-intensive.

Keywords: Technology Policy, Indigenous Innovation, External Knowledge, China

JEL Classification: O31, O33, O35, O38

Suggested Citation

Fu, Xiaolan and Woo, Wing Thye and Hou, Jun, Technological Innovation Policy in China: The Lessons, and the Necessary Changes Ahead (February 29, 2016). Available at SSRN: https://ssrn.com/abstract=2798806 or http://dx.doi.org/10.2139/ssrn.2798806

Xiaolan Fu

University of Oxford ( email )

3 Mansfield Road
Oxford, Oxfordshire OX1 3TB
United Kingdom

Wing Thye Woo (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-3035 (Phone)
530-752-9382 (Fax)

HOME PAGE: http://www.econ.ucdavis.edu/faculty/woo/woo.html

Jun Hou

Overseas Development Institute (ODI) ( email )

111 Westminister Bridge Rd.
London, SE17JD
United Kingdom

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