Exploiting the Implementation Gap: Policy Divergence and Industrial Upgrading in China's Wind and Solar Sectors

Abstract

This article argues that manufacturing policies of Chinese local governments have provided an important corrective to some of the weaknesses inherent in the central government’s indigenous innovation framework, most importantly its inattention to the importance of advanced manufacturing capabilities for innovation. Based on an original dataset of over 100 executive interviews conducted with 43 Chinese wind and solar firms, I identify both central government R&D funding and continued local government support for manufacturing as a critical factors in enabling innovation among China’s renewable energy firms. In particular, this article shows that firms have utilized a combination of both central and local government policies to establish unique engineering capabilities required for innovation in commercialization and scale - up to mass production. The findings suggest that continued local government support for the manufacturing economy has not undermined central government innovation policies, but has (1) broadened the range of resources available to entrepreneurial firms and (2) enabled new options for industrial upgrading that are outside the conceptualization of innovation underlying the central government’s indigenous innovation framework.