The Innovation and Learning Capabilities of Chinese Firms

Abstract

Based on the example of the automobile and electronics sector in China, the article examines the technological learning of companies in China and the way it is influenced by industrial policy. Companies have consolidated their production capacity and technological learning but are rarely in a position to develop an innovation capability. The article shows the diversity of enterprises and identifies two opposing modes of development, either based on technological transfers of foreign technologies mainly through state-owned enterprises or based on assimilation and learning of technologies acquired through the clients in private or foreignowned companies or other new enterprises of a rather small size. The latter are less favored by official policies and have difficulty obtaining the advantages that may have been available through the national innovation system (training, higher education, research, technical centers, funding). This separation of the innovation system promoted by the government and the industrial system that was created through technological learning is, in the authors' opinion, the main reason for the low innovation capability of Chinese industry. The coexistence of these two different modes is a characteristic feature of China and explains why China does not follow the experience of South Korea and Japan using the path of "imitation to innovation."