Economic Change and Restructuring

, Volume 49, Issue 2–3, pp 139–157 | Cite as

Technological innovation policy in China: the lessons, and the necessary changes ahead

  • Xiaolan Fu
  • Wing Thye WooEmail author
  • Jun Hou


China has now moved considerably away from being an imitative latecomer to technology toward to being an innovation-driven economy. The key lessons from China’s experience are that (1) there is synergy between External Knowledge and Indigenous Innovation because the process of learning the tacit knowledge required in using the foreign technology fully is made easier by strong in-house R&D capability; (2) the open innovation approach is very important because it allows multiple driving forces—the state, the private sector and MNEs—with each playing a changing role over time; and (3) the commencement of foreign technology transfer and investment in indigenous innovation should go hand in hand. Without the numerous well-funded programs to build up the innovation infrastructure to increase the absorptive capacity of Chinese firms, foreign technology would have remained static technology embedded in imported machines and would not have strengthened indigenous technological capability. However, China could still end up in the middle-income trap, unless it undertakes a series of critical reforms in its innovation regime in order to keep moving up growth trajectories that are increasingly skill-intensive and technology-intensive.


Technology Innovation Openness Policy China 


  1. Atkinson AB, Stiglitz JE (1969) A new view of technological change. Econ J 79(315):573–578CrossRefGoogle Scholar
  2. Balassa B (1971) The structure of protection in developing countries. Johns Hopkins Press, BaltimoreGoogle Scholar
  3. Balassa B (1982) Development strategies in semi-industrial economies. Johns Hopkins Press, BaltimoreGoogle Scholar
  4. Chesbrough, HW (2003) The Era of open innovation. MIT sloan management review, V44 N3, Spring 2003, April 15, 2003, pp 35–41Google Scholar
  5. Chesbrough HW (2006) Open innovation: a new paradigm for understanding industrial innovation. In: Chesbrough H et al (eds) Open innovation: researching a new paradigm. Oxford University Press, Oxford, pp 1–12Google Scholar
  6. Cohen W, Levinthal D (1989) Innovation and learning: two faces of R&D. Econ J 99:569–596CrossRefGoogle Scholar
  7. Cooper C (1989) Technology and innovation in international economy. United Nation University Press, The NetherlandsGoogle Scholar
  8. Diamond J (1997) Guns, germs, and steel: the fates of human societies. Norton, New YorkGoogle Scholar
  9. Franco E, Ray S, Ray PK (2011) Patterns of innovation practices of multinational-affiliates in emerging economies: evidences from Brazil and India. World Dev 39(7):1249–1260CrossRefGoogle Scholar
  10. Fu X (2008) Foreign direct investment, absorptive capacity and regional innovation capabilities: evidence from China. Oxf Dev Stud 36(1):89–110CrossRefGoogle Scholar
  11. Fu X (2015) China’s path to innovation. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  12. Fu X, Gong Y (2010) Absorptive capacity and the benefits from global reservoirs or knowledge: evidence from a linked China-OECD dataset. SLPTMD Working Paper 31, University of OxfordGoogle Scholar
  13. Fu X, Cosh A, Hughes A, De Hoyos R, Eisingerich A (2006) The experiences of UK mid-corporate companies in emerging asian economies. UK Trade & Investment, London. 2006 (URN 06/1137)Google Scholar
  14. Kamarck A (1976) The tropics and economic development: a provocative inquiry into the poverty of nations. Johns Hopkins University Press, BaltimoreGoogle Scholar
  15. Kuznets S (1966) Modern economic growth: rate, structure, and spread. Yale University Press, New HavenGoogle Scholar
  16. Landes D (1998) The wealth and poverty of nations: why some are so rich and some are so poor. Norton, New YorkGoogle Scholar
  17. Li XB (2011) Sources of external technology, absorptive capacity, and innovation capability in Chinese state-owned high-tech enterprises. World Dev 39(7):1240–1248CrossRefGoogle Scholar
  18. Marx K, Engels F (1848) The Communist manifesto. Republished by Washington Square Press (1964), New YorkGoogle Scholar
  19. North D, Thomas RP (1973) The rise of the western world: a new economic history. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  20. OECD (2008) Reviews of innovation policy: China. OECD, ParisGoogle Scholar
  21. Polanyi M (1967) The tacit dimension. Routledge & Kegan Paul, LondonGoogle Scholar
  22. Rodrik D (2008) The real exchange rate and economic growth. Brookings papers on economic activity, FallGoogle Scholar
  23. Schumpeter J (1942) Capitalism, socialism, and democracy. Harper & Bros, New YorkGoogle Scholar
  24. Solow RM (1970) Growth theory: an exposition. Oxford University Press, New YorkGoogle Scholar
  25. Trott P, Hartmann DAP (2009) Why ‘open innovation’ is old wine in new bottles. Int J Innov Manag 13(4):715–736CrossRefGoogle Scholar
  26. Varum CA, Huang C (2007) China: building an innovative economy. Chandos, CambridgeCrossRefGoogle Scholar
  27. Wang H (2012) Globalizing China: the influence, strategies and successes of chinese returnees. Emerald Publishing, BradfordGoogle Scholar
  28. Weber, M (1905) The protestant ethic and the spirit of capitalism. Republished Routledge (1992), LondonGoogle Scholar
  29. Woo, WT (1990) The art of economic development: markets, politics and externalities. Int Organ 44(3), SummerGoogle Scholar
  30. Woo WT (2004) Serious inadequacies of the Washington consensus: misunderstanding the poor by the brightest. In: Teunissen JJ, Akkerman A (eds) Diversity in development: reconsidering the Washington consensus. FONDAD (Forum on Debt and Development), The Hague, pp 9–43Google Scholar
  31. Woo WT (2012) China meets the middle-income trap: the large potholes in the road to catching-up. J Chin Econ Bus Stud 10(4):313–336CrossRefGoogle Scholar
  32. World Bank (1985) World development report 1985: international capital and economic development. Oxford University Press, OxfordCrossRefGoogle Scholar
  33. Xue L (1997) A historical perspective of China’s innovation system reform: a case study. J Eng Technol Manag 14:67–81CrossRefGoogle Scholar
  34. Zhou Y (2008) The inside story of China’s high-tech industry: making “silicon valley” in Beijing. Rowman & Littlefield Publishers, LanhamGoogle Scholar
  35. Zhou Y, Hsu J-Y (2011) Divergent engagements: roles and strategies of Taiwanese and mainland Chinese returnees entrepreneurs in the IT industry. Glob Netw 11(3):398–411CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Technology and Management Centre for Development, Department of International DevelopmentUniversity of OxfordOxfordUK
  2. 2.Department of EconomicsUniversity of California, DavisDavisUSA
  3. 3.Jeffrey Cheah Institute on Southeast AsiaSunway UniversityBandar SunwayMalaysia
  4. 4.School of EconomicsFudan UniversityShanghaiChina

Personalised recommendations