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Product innovation in China’s food processing industries

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Abstract

Using the innovation production function approach, this paper focuses on the determinants of product innovation in China’s food processing industries. Empirical analysis based on firm level data over the period 2005–07 shows that R&D intensity has a positive and statistically significant impact on product innovation in China’s feed processing industry. Large firms in China’s cereals milling, feed processing, and meat products & by-products processing industries are more likely to be involved in product innovation. Export intensity affects product innovation in cereal milling and feed processing industries. Foreign-invested feed processing firms are more likely to be involved in product innovation.

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Notes

  1. Rapid economic growth, along with an increase in the rate of urbanisation, has contributed to an increase in the size of China’s food-processing industry. The demand for packaged food in China is skyrocketing. In 2014, the revenue of China’s food-processing industry was estimated to be around US$2 trillion (Jacobs 2016). China is now the largest consumer of food and beverages surpassing the US. State-owned enterprises do not monopolise the food processing sector anymore. The productivity growth in China’s food manufacturing and processing industries has slowed in recent years due to water and soil pollution, which has also contributed to an increase in food prices and hence the demand for imported fresh and packaged food is rising. The Chinese food processing sector has also been rocked by scandals, most notably the baby milk powder scandal that led to a surge in demand for foreign produced baby milk powder. In recent years, some Chinese factories have been found to be breaking food quality standards. At the same time, the Chinese population in general is slowly switching to the healthier options. For example, demand for white meat over red is slowly increasing and there is greater interest in home cooking (ANZ 2013).

  2. Unfortunately, at this stage, more recent data are not available. Due to confidentially and government control, firm level data are normally released with a significant time lag.

  3. http://www.stats.gov.cn/tjsj/ndsj/2011/html/zb20.htm

  4. As some variables included in the empirical model can take non-positive values, all variables are not in natural logarithms.

  5. In equation (1), the substitutability-complementarity of R&D with other inputs, such as capital intensity, might vary across industries (Goel 1990). Considering this, one may employ a multi-equation approach. For example, in addition to equation (1), a second equation where R&D intensity is a function of other inputs can be introduced to form a two-equation model. However, in this paper, our aim is to quantify the impact of the specified inputs on innovation and hence we leave the multi-equation approach for future research. We are extremely grateful to an anonymous reviewer for bringing this point to our attention.

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Acknowledgements

We are grateful to two reviewers for very helpful comments and suggestions. This paper has also greatly benefitted from comments and suggestions received from participants of the Chinese Economics Society Australia (CESA) held in Melbourne and the Chinese Academy of Social Sciences conferences held in Beijing. However, all remaining errors and omissions are the sole responsibility of the authors.

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Authors and Affiliations

  1. College of Business Law & Governance, James Cook University, QLD, Townsville, 4811, Australia

    Sizhong Sun

  2. School of Business, University of the Sunshine Coast, QLD, Maroochydore DC, 4558, Australia

    Sajid Anwar

  3. School of Commerce, University of South Australia, Adelaide, SA, 5001, Australia

    Sajid Anwar

  4. Shanghai Lixin University of Accounting and Finance, Songjiang District, Shanghai, China

    Sajid Anwar

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  1. Sizhong Sun
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  2. Sajid Anwar
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Correspondence to Sajid Anwar.

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Sun, S., Anwar, S. Product innovation in China’s food processing industries. J Econ Finan 42, 492–507 (2018). https://doi.org/10.1007/s12197-017-9398-6

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  • DOI: https://doi.org/10.1007/s12197-017-9398-6

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