Indigenous Innovation Research Articles

The outlook for China’s innovation-driven development beyond COVID-19

In the post-COVID-19 era, high-quality development will be a key characteristic of China’s economic development. Despite the disruption caused by the pandemic, China’s economy has remained on track for stable and long-term development. In the bid to drive China’s economic transition from factor-driven to innovation-driven development, it is imperative to improve total factor productivity, and that effort should focus on five key factors: urbanization and labour migration; the spillover effect of foreign technologies; human capital enhancement; scientific and technological progress; and marketization process. It is important to align with the main trends and directions of the scientific and technological revolution and industrial transformation. It will be increasingly necessary to focus on developing a dominant technological system represented by next-generation information technology, biotechnology, new energy sources and new materials and to leverage key accelerators of progress, including institutional reform, market optimization and indigenous innovation in order to advance high-quality economic development.

Subsidizing Technology Competition: China’s Evolving Practices and International Trade Regulation in the Post- Pandemic Era

This article contributes to the growing debate about industrial policies and subsidies, the adequacy of the rules of the World Trade Organization (WTO), and future international negotiations of industrial subsidies, using China’s practices in the high-tech sector as an illustration. Through a review of China’s industrial policies in the high-tech sector including the 14th Five-Year Plan (2021-2025), we show China’s entrenched commitments and ambitions towards indigenous innovation, technology independence, and global leadership in key and emerging technologies especially in strategic sectors. However, we challenge the mainstream view that the existing WTO rules are inadequate to deal with Chinese subsidies. Based on a detailed analysis of the general subsidy rules and the relevant China-specific rules, we argue that the current rules create no hurdle to tackling the major types of technology subsidies in China. Any perceived deficiencies are not China-specific and can only be addressed by WTO Members via negotiations. If such negotiations are desirable, then governments should seek to leverage the impacts of the pandemic and the global (ab)use of subsidies to generate the political will needed. Drawing on existing proposals for the reform of WTO subsidy rules, we develop some general principles and approaches to facilitate future negotiations emphasizing the need to focus on targeting trade-distortive subsidies rather than China, to balance between strengthening subsidy rules and preserving policy space, to follow economic guidance and data while accommodating political considerations, and most innovatively, to shift from the ‘one-size-fits-all’ approach to a country-specific approach through a scheduling method whereby an Industrial Subsidy Schedule is created to record policy objectives, subsidy commitments, and exceptions of each nation.

Government-Controlled Enterprises in Standardization in the Catching-Up Context: Case of TD-SCDMA in China

In this article we analyze the case of TD-SCDMA system standardization in China. Specifically, we focus on the leading role that government-controlled enterprises (GCEs) played in the standardization, and how the Chinese government supported GCEs. The case study findings advance current knowledge on how governments support standardization efforts in a catching-up context. We found that, under strong government support and with GCEs' leadership, a latecomer country such as China, with certain technological capabilities and in economic, social, and institutional contexts that favor indigenous innovation, can pursue path-breaking innovation with complex technological systems. Governments should engage in various tactics to support GCEs that lead the standardization process. Most importantly, governments should intervene in scoping decisions on technological systems and research and development forces in the standard development stage, and offer moral suasion in the standard diffusion stage. We provide practical implications for governments that support GCEs in technology catching-up.

‘Anti-extortion’ mechanism of indigenous innovation by technologically backward firms: evidence from China

ABSTRACT Aiming at the strategic behaviour in ‘technology make-or-buy decisions’ in the real economy, this study develops a Cournot competition model with endogenous technological level, by comparing the technology acquisition cost of technologically backward firms under different technology acquisition strategies, we theoretically analysed the ‘anti-extortion’ mechanism of indigenous innovation by technologically backward firms, and the relationship between indigenous innovation and technology imports is empirically tested by using the data of Chinese industrial enterprises above designated size. We show that indigenous innovation can significantly enhance a firm's bargaining power, and the technology acquisition strategy of simultaneous technology imports and indigenous innovation can not only reduce the technology imports cost but also reduce the indigenous innovation cost. Therefore, only by indigenous innovation based on technology imports, can firms enhance their market competitiveness.

Політика ендогенного розвитку фармацевтики в Китаї: уроки для України

This article provides overview of the programs and plans, tools of scientific and technological, innovation and industry policies for new drug discovery. The authors substantiate that China has a government-led integrated approach to protecting and strengthening pharmaceutical sector. Discovered and proved the fact that the Chinese Government is encouraging R&D in the pharmaceutical sector, with special attention to the biotechnologies and is providing substantial support in the form of subsidies, tax incentives and establishment of special high-tech zones to encourage the production of new products and processes in the pharmaceutical sector. In addition to government support, there is substantial foreign direct investment in production and R&D, which entails transfer of technology and intensifies endogenous innovations in pharmaceutical manufacturing. The authors give special attention to the fact that China's Government Procurement provides domestic price preference programme and realizes policies promoting indigenous innovation products and technology transfer. Initiatives to create human resources for pharmaceuticals industry and government aid attract foreign specialists and highly qualified Chinese migrants. Government support has raised the level of production localization, and increased employment and value added in the industry. Among the achievements attained due to the political mechanisms created in this country, are scientific and technological competencies and technology development, and high competitiveness of the domestic pharmaceutical industry, protection of intellectual property rights, access to foreign markets, import substitution and lower dependence on imported technologies, pharmaceutical intermediate goods and end-product, and high consumer quality of manufactured goods. It is proven that China's state-led innovation and investment development model has supported growth over the last 40 years and produced numerous endogenous innovations in pharmaceutical manufacturing. The article presents the authors' vision of the determinants of success of the Chinese government in building innovation potential of domestic pharmaceuticals industry and of the resilience of the industry in the face of crisis caused by COVID-19.

Opportunity Seldom Knocks Twice: Influencing China’s Trajectory via Defend Forward and Persistent Engagement in Cyberspace

executive summary: This article challenges the conventional wisdom regarding the strategic motivation and significance of China’s cyber-enabled theft of U.S. intellectual property (IP) and suggests that the U.S. has a unique opportunity via its cyber strategy to influence the trajectory of China’s rise. main argumentCommon refrains regarding the strategic significance of China’s theft of U.S. IP include concerns of immediate economic losses, with estimates ranging from $250 billion to $600 billion annually, and the potential longer-term threat of disincentivizing innovation investments. But a focus on these consequences obscures the true strategic intent of China’s cyber-enabled IP-theft campaign. Around 2010, the Chinese Communist Party (CCP) leadership perceived that China was approaching a history-informed time limit to transition from a middle- to high-income economy, and that slowing growth or economic stagnation and sociopolitical upheaval could put at risk both the CCP’s legitimacy and China’s great-power status. In response, the CCP adopted a multifaceted technology transfer policy to counter the expected slowing growth by stimulating indigenous innovation. Only one facet of that policy—a centrally directed, significant cyber-enabled campaign of IP theft—was able to produce results in time, with certainty, and at a scale necessary to ensure China avoided economic stagnation. In 2018 the CCP again ramped up cyber-enabled IP theft to help mitigate pressure by jump-starting additional innovation-based growth. U.S. Cyber Command is a mature combatant command, and the U.S. Department of Defense is implementing a cyber strategy of “defend forward” and “persistent engagement” that intends to inhibit such illicit, cyber-enabled strategic gains by adversaries. policy implications• The U.S. has a second opportunity to use cyber strategy to shape China’s rise while the Chinese economy is vulnerable. U.S. Cyber Command is now better aligned to the challenge of countering Chinese IP theft and has an improved capability to execute U.S. strategy. • China may still avoid long-term stagnation, but Xi Jinping’s predilection for cyber-enabled IP theft for mitigating economic pressure currently gives the U.S. a strategic advantage. • By denying China’s cyber-enabled IP theft, the U.S. could slow China’s rise or, given its current state, potentially influence the country to backslide into enduring stagnation.

Global Networks, Local Specialisation and Regional Patterns of Innovation

A large academic consensus exists on the idea that successful innovative processes are geographically bounded within regions. Nevertheless, the ability of regions to capture and re-use external knowledge is also regarded as a fundamental element to sustain and refine the local profile of specialisation and competitiveness. The present article combines these views to investigate the sources of the regional innovation process, by analysing data on Italian regions over the period 2007-2012. We define regional external networks based on all the foreign subsidiaries of local multinational enterprises identifiable as global ultimate owners. Our main results suggest that both the internal specialisation and the outward networks can generate indigenous innovation, but the role of the networks varies substantially according to its density, its degree of complementarity with the specialisation profile, its geographical spread and the specific location of the foreign subsidiaries. Our results, then, support a view of the regional innovation as an interactive process whereby valuable knowledge resources are not only generated within the reach of the local economy, but they are also integrated with external inputs. This contrasts with recent anti-globalisation views according to which the increase in the foreign operations of national companies impoverishes the local economy.

A New Chinese Economic Order?

ABSTRACT China is incrementally developing a new, decentralized model of trade governance through a web of finance, trade, and investment initiatives involving memorandum of understanding, contracts, and trade and investment treaties, supported by an indigenous innovation policy that is transnational in its reach. In this way, China could create a vast, Sino-centric, legal order in which the Chinese state plays the nodal role. It is a hub and spokes model, with China at the hub. In this article, we first examine China’s export of an infrastructure-based development model, implemented through Chinese state-owned and private enterprise investments and commercial contracts (Part B), before turning to China’s development of a complementary web of free trade and investment agreements (Part C), and an indigenous innovation policy (Part D). The paper theorizes and empirically traces how these Chinese initiatives shape the evolving ecology of the transnational legal order for trade.

Precursors of intellectual property rights enforcement in East and Southeast Asia

In this study we identify the main determinants of perceived strength of intellectual property rights in four developed (Japan, Singapore, South Korea, and Taiwan) and five emerging (China, Indonesia, Malaysia, the Philippines, and Thailand) Asian countries over the period 2003–2016. We use a panel model with additive unobserved individual-specific heterogeneity in a high-dimensional setting. The setting allows the number of time-varying regressors to exceed the sample size. Based on the Cluster–Lasso approach, we found that (1) bribery and corruption (inverse), equal opportunity, administration of justice, knowledge transfer, personal security and private property rights, and qualified engineers are significant determinants of intellectual property rights for developed countries; (2) adaptability of government policy, bribery and corruption (inverse), bureaucracy (inverse), and science in schools are significant determinants of intellectual property rights for emerging countries. Policy makers may use these results to strengthen IP rights and thus encourage indigenous innovation as well as foreign direct investment.

The Impact of “Scramble for Talent” Campaign on College Graduates’ Employment and Entrepreneurship in the Context of Indigenous Innovation and Industrial Upgrading

Indigenous innovation and industrial upgrading are the defining trends of economic development in the new era. With the formation of city clusters and the more scientific industry plant layout, the demand for talents in various cities is increasingly pressing. College students have become the major groups in the context of talent introduction policy. Major cities have initiated preferential policies to attract talents. The Scramble for Talent Campaign occurs among cities, making a considerable difference on the college graduates’ employment and entrepreneurship. Since the initiation of “Scramble for Talent” campaign, the talent flow in relevant cities has accelerated measurably. The research shows that Hukou (the household registration) is the main element that the college graduates factor into consideration when selecting places of employment, and the fund and policy support they are able to receive are the key elements to promote innovation. In the “Scramble for Talent”, such measures as relaxing restrictions on household registration policy, launching preferential loans policy and other support policies have considerably influenced on the college graduates’ employment and entrepreneurship, which helps to optimize the distribution of talent resources and improve the willingness and success rate of entrepreneurship. In order to illustrate the effect, a series of policies and the transformation and upgrading of pillar industries are required in the introduction of talents. The blind scramble for talents will not only unbalance the allocation of human resources but will also cause social problems. It will spread the “City Disease” from the first-tier cities to the second and third-tier cities. The college students and all relative administration in all regions should pay high attention to this problem during the course. Generally speaking, the “Scramble for Talent” Campaign is a special phenomenon in a special period, which positively impact the college graduates’ employment and entrepreneurship.

Global networks, local specialisation and regional patterns of innovation

A large academic consensus exists on the idea that successful innovative processes are geographically bounded within regions. Nevertheless, the ability of regions to capture and re-use external knowledge is also regarded as a fundamental element to sustain and refine the local profile of specialisation and competitiveness. The present article combines these views to investigate the sources of the regional innovation process, by analysing data on Italian regions over the period 2007–2012. We define global networks based on all the local firms identifiable as global ultimate owners and their foreign subsidiaries. Our main results suggest that both the internal specialisation and the regional external linkages can generate indigenous innovation, but the role of the networks varies substantially according to its density, its degree of complementarity with the specialisation profile, its geographical spread and the specific location of the foreign subsidiaries. Our results, then, support a view of the regional innovation as an interactive process whereby valuable knowledge resources are not only generated within the reach of the local economy, but they are also integrated with external inputs. This contrasts with recent anti-globalisation views according to which the increase in the foreign operations of national companies impoverishes the local economy.

Firm innovation system: Paths for enhancing corporate indigenous innovation capability

To obtain a sustainable competitive advantage and achieve global innovation leadership, firms in China and other emerging economies must develop strong indigenous innovation capabilities through the coevolution of strategy, organization, resources, and culture. Drawing on current innovation management theories and practices, this study proposes four systematic paths for improving firm innovation systems (FISs), namely, the R&D-based internal collaborative FIS, the strategic vision-driven FIS, the open and user-driven FIS, and the holistic ecosystem-driven FIS. This study contributes to the systematic approach for enhancing corporate indigenous innovation capability based on FISs. Moreover, this study provides theoretical and practical insights for China as well as other developing countries to cultivate world-class enterprises and build an innovative nation.

Implications of China's innovation policy shift: Does “indigenous” mean closed?

AbstractChina's government aims to become an innovation nation and promotes the development of so‐called indigenous innovation. Under this paradigm of state‐encouraged innovation, however, it is unclear how domestic firms organize their innovation processes. We distinguish between two strategies in that respect: closed versus open innovation. Our findings suggest that firms with closed innovation processes collaborate in close geographic distance, rely on DUI‐modes of learning, and collaborations are based on guanxi. In contrast, firms with open innovation processes collaborate over large distances and rely on STI‐modes of learning that are not necessarily guanxi‐based. The findings help to understand the heterogeneous nature of indigenous innovation in China.

Relevance and social responsibility of sustainable university organizations: analysis from the perspective of endogenous capacities

The university social relevance is the effective management of the academic functions in a committed way, from which it analyzes, studies, and investigates the problems, needs, requirements of the social environment to identify, characterize, rank them. And a model social action to the research, teaching, extension, and training of professionals, consistent with social needs, linked to the realities of the various contexts of human performance that neo university organizations, rescuing sustainability with human development and socioeconomic, involving the creative potentials and indigenous innovations of society. To coexistence between community and university in favor of endogenous growth is required, conceived as the leverage from the social and organizational strengths of the human conglomerate in reference, which promote; quality of life and sustainable human progress. Consequently, the purpose of this dissertation is limited to carrying out an analysis of the relevance and social responsibility of sustainable university organizations from the endogenous perspective. From the qualitative, interpretive, and hermeneutical paradigm, the categories of analysis are reviewed, to conclude; that the university theoretically approaches endogenous development. However, it is necessary to generate links of structural- organizational configuration within the educational institutions that involve processes related to their sustainability over time and their impacts.

Do Subsidies Matter for Indigenous Innovation and Firm Productivity?

This paper examines the effects of public subsidies across several dimensions of innovation and the implications for productivity. As an identification strategy, panel data is used to estimate a structural innovation model that controls for unobserved heterogeneity combined with matching techniques that help ensure comparability between subsidized and non-subsidized firms. The findings reveal that public subsidies reduce firms’ economic performance in lower and higher technology industries despite promoting indigenous innovation in the higher technology industries. Policymakers may tolerate lower average efficiency if they expect that some of the state-backed firms will go on to become innovators that go on to generate significantly large social welfare payoffs. Although the find-ings do not support such an expectation, thus bringing into question whether the social payoff from China’s so-called picking ‘winners’ strategy justifies the cost.

China's Pursuit of Cyberpower

China's Pursuit of Cyberpower Adam Segal (bio) China is one of the most active cyberspace players in the Asia-Pacific, developing and deploying cyber capacities in pursuit of its economic, political, and strategic objectives. Chinese computer network operations are conducted to strengthen the competitiveness of China's economy, accelerate the modernization of the People's Liberation Army (PLA), weaken opponents of the Chinese Communist Party (CCP), resist international pressure and foreign ideas, and offset U.S. dominance in conventional military capabilities.1 Beijing is also aggressively supporting the indigenous innovation of emerging technologies that will give it new capabilities in cyberspace, especially 5G, artificial intelligence, and quantum information systems. Although Western governments often dismiss comments from Chinese foreign ministry officials declaring China the world's biggest victim in cyberspace as distractions and diversions, Chinese officials do in fact see their cybersecurity as weak relative to the degree of threat and the capabilities they perceive from potential adversaries, the United States in particular.2 As the July 2019 defense white paper puts it, "Cybersecurity remains a global challenge and poses a severe threat to China."3 Perhaps the clearest evidence that the leadership sees China's situation as precarious is the speed with which it has addressed what it sees as two major sources of weakness: an underdeveloped cybersecurity regulatory framework and widespread dependence on foreign technology in critical networks. Over the last five years, China has rapidly developed new cybersecurity institutions, laws, guidelines, and standards and has moved to replace foreign suppliers with domestic counterparts. [End Page 60] Both Chinese capabilities and vulnerabilities are likely to increase in the next five years. This combination of strengths and weaknesses means that China is primarily a cyberespionage threat to the Asia-Pacific. While the potential for Beijing to use more disruptive or destructive cyberattacks against an adversary in a regional conflict is high, especially against command-and-control systems, CCP leaders are likely cognizant that China is vulnerable to similar attacks. This essay introduces the range of Chinese cyberoperations and the organizational structure that supports and conducts them. It also highlights significant weaknesses in Chinese cyberdefenses, such as an underdeveloped cybersecurity industry and lack of investment and expertise. The essay concludes that the combination of the Chinese economy becoming more reliant on information and communications technologies and the PLA becoming more dependent on digital systems has resulted in Chinese leaders becoming more sensitive to China's vulnerability to cyberattacks. China's Cyberattacks The vast majority of computer attacks originating from China have targeted private-sector companies in an effort to steal intellectual property, trade secrets, and other information that could help China become more economically competitive. President Xi Jinping set a goal for China to become a "world-leading" science and technology power by 2049, and the country has significantly ramped up spending on research and development; expanded enrollment in science, technology, engineering, and mathematic disciplines at universities; and pushed specialized industrial strategies in emerging technologies, such as artificial intelligence, semiconductors, quantum research, and next-generation communication technologies. China has also, however, directed cyber industrial espionage at high-technology and advanced manufacturing companies in the United States, Europe, Japan, and Southeast Asia.4 Hackers have reportedly targeted the negotiation strategies and financial information of firms in the energy, banking, law, and pharmaceutical sectors. In an operation known as Cloud [End Page 61] Hopper, Chinese hackers, allegedly from the Ministry of State Security, breached at least a dozen cloud providers over several years, which allowed them access to data from hundreds of companies.5 The damage this theft inflicted on the victims' economies, or, conversely, how much it helped China's economy, is unknown. The Office of the Director of National Intelligence estimated in November 2015, however, that all cyber-enabled economic espionage, not just Chinese activity, costs the U.S. economy $400 billion per year.6 State-supported hackers also use cyberattacks to steal military secrets to accelerate the PLA's modernization and gather political information on agencies, institutions, and individuals that might have an impact on Beijing's foreign policy or threaten domestic stability. While Andrea and Marco Gilli have argued that the complexity of modern weapon systems makes it...

Industry Relatedness, FDI Liberalization and the Indigenous Innovation Process in China

This paper employs a structural innovation model to study the process of indigenous innovation in China and the role of industry relatedness. To better take into account China’s transitioning economy context, I further test to what extent the relationship between relatedness and firms’ innovation process is influenced by the relaxation of foreign ownership controls, an arguably exogenous shock. Controlling for selection, simultaneity and unobserved heterogeneity, the results show that firm RD (ii) recombine knowledge from related industries in order to bring forth new, proprietary ideas, processes or concepts; and (iii) help solve process or organizational problems faced in related industries.

The Security Environment and China’s Strategy for Technological Advancement: Between Technological Dependence and Technological Autonomy

China’s strategy for technological advancement since 1949 can be divided into four distinct phases, alternating between technological dependence and technological autonomy. Why does China pursue technological autonomy in some periods but adopt technological dependence in others? This paper argues that when the security environment intensifies, the strategy of technological autonomy prevails. In contrast, when China’ security environment relaxes, it is inclined to adopt technological dependence as the alternative strategy. Although the anarchic nature of the international system compels the state to pursue technological autonomy, the relaxed security environment makes the strategy of technological dependence possible. By examining the four phases, from the “lean to one side” of the 1950s, and “fighting with both fists” in the 1960s, to the “open door” and the post-Cold War era, this paper seeks to demonstrate how the security environment has reshaped China’s technological strategy, including the First Five Year Plan, the Third Front construction, the technology transfer in the 1980s and the launching of “indigenous innovation”. To this end, it is necessary to investigate the security environment.

Experimental governance in China’s higher education: stakeholder’s interpretations, interactions and strategic actions

ABSTRACT The state-university’s interaction and relationship has long been a key focus of scholarly discussion. A distinct strategy in China’s higher education is policy experimentation (PE), which allows indigenous policy innovations to be generated at local institutions and incorporated into national policymaking. The PE approach allows power negotiation among various stakeholders in creating a strategy space for reform. Through case studies, the paper examines those complicated processes enabled and shaped by stakeholders’ perceptions, behaviours and strategic actions. It proposes three types of rationales for using PE as mission-driven, problem-driven and administration-driven. The university uses ‘bargaining and persuasion’ and ‘formation of advocacy coalition’ in negotiating with the state whereas the state communicates with the university through ‘documentary politics’ and ‘open method of coordination’. Thus, PE can be regarded as a new way of HE governance in effectively mediating the state authority and university power in building consensus for China’s HE development.

Going out to innovate more at home: Impacts of outward direct investments on Chinese firms' domestic innovation performance

This study explores the effects of cross-border mergers & acquisitions (CBMA) on domestic innovation of Chinese firms. We build a new panel dataset that matches information on CBMA and innovation activities for China's publicly listed firms. We rely on matching techniques combined with a difference-in-differences estimator to study the causal effects of CBMA respectively on firms' investments in innovation, innovation outputs, and financial performance. The main findings reveal that CBMA has both a positive impact on firms' R&D spending and number of patent applications, no statistically significant effect on the number of granted patents or on the quality of those patents, and a negative effect on firms' financial performance. These results depend, however, on the type of CBMA (horizontal or vertical), destination country (OECD or non-OECD), and the technological intensity (high-tech or not) of the acquirer and target firm. Overall, the findings bring into question whether CBMAs, and China's going-out strategy, will significantly boost its indigenous innovation capabilities.