Understanding the Regional Innovation Capacity in China After Economic Reforms

Abstract

Our study aims to examine the drivers of China’s regional innovation capacity (RIC). Drawing from innovation system literatures, our study proposes that RIC can be determined by (a) innovation actors (higher education institutions, enterprises, and public research institutes); (b) innovation inputs (financial capital and human resource), and (c) international interactions. The main finding was the significant impact of higher education institutions demonstrating higher education institutions are crucial innovation actors. The interaction effect also found between foreign direct investment (FDI) and Science and Technology (S&T) investment suggests governments should pay more attention to the indirect impact of drivers in building RIC in China.

A global perspective of entrepreneurship and innovation in China

“…Ever since China's reform and economic opening some forty years ago, the Chinese market has attracted enormous amounts of foreign direct investment (FDI) from multinational enterprises (MNEs). Not only are foreign MNEs in China one force of innovation activities in China, it has been determined that FDI knowledge spillovers create significant innovation benefits for the local firms in China as well (Li et al, 2010(Li et al, , 2013Zhou et al, 2016), as they can learn from the multinational corporations (MNCs) to develop technological innovation more tailor-made for the Chinese customers. At the same time, Chinese Government at different levels have also been strategic at attracting global top-notch scientists, academics and high-tech entrepreneurs (Zhao and Zhu, 2009).…”

“…Innovation and new venture creation typically require a decentralization of decision-making, wide access to financing, flexible organizational controls (Chiu et al , 2016; Hamel, 2007; Redding, 2016; McCloskey, 2010) and the key social validation of innovative actions (McCloskey, 2016; Wang et al , 2008; Wei, et al , 2015). Such a decentralization of power and more flexible organization controls may be paramount to a country with vast regional differences in innovation capacity and seeking to develop funding models that encourage and incentivize indigenous innovation (Zhou et al , 2016). This likewise acknowledges the importance of different regions and their (differing) impact on firms and their performance (Rugman and Oh, 2010).…”