Interpreting the Role of the State in Innovation Transformation:Review of “Dual Roles of the State: A National Innovation System Approach for Development and Transformation Analysis”

Abstract

This article reviews the book “Dual Roles of the State: A National Innovation System Approach for Development and Transformation Analysis” by Feng Kaidong from Peking University. The neoclassical economic paradigm has limited explanatory power for innovation because it fails to grasp the non-linear, knowledge reticent character of innovation. The book explains the logic of innovation market interaction at the level of micro-network interactions. Unlike the perfect market, which is coordinated by price, the interaction between subjects in the innovation market is an organized process of mutual discovery and cooperative knowledge exchange. The “organized” market surpasses the perfect market because it is more in line with the information structure of innovation knowledge. The key to successful innovation is a smooth transition between public and private knowledge, and the best option for unlocking the knowledge conversion mechanism is the government. The state plays two roles in the innovation system: one is as an important institutional supplier and resource allocator for innovation activities, and the other is as a key driver of the transformation of the innovation economic system. Innovation transformation requires a concentration of resources by the state in strategic industries, and the transformation requires state capabilities such as the ability to allocate resources on a large scale and an information feedback mechanism that can identify strategic industries. Based on the historical analysis of innovation transformation in developed countries, the book explores the process and ways in which countries with successful transformation experiences acquire the national capabilities required for transformation, and provides new references for China's autonomous innovation system construction.