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Innovation capacity and economic development: China and India

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Abstract

Decomposing the GDP growth from 1981 to 2004, this paper finds that innovation capacity has contributed significantly to the economic growth of China and India, especially in the 1990 s. Outputs of the national innovation system, measured by patents and high-tech/service exports, demonstrate the considerable progress China and India have made in innovation capacity. The enhanced innovation capacity of China and India is primarily due to their heavy investment in the inputs of innovation system, i.e., R&D expenditure and R&D personnel, in recent decades. This paper emphasizes the role that the governments have played in promoting innovation capacity and their contribution to economic development. Both governments have transformed their national innovation systems through linking the science sector with the business sector, providing incentives for innovation activities, and balancing import of technology and indigenous R&D effort. Using case studies of domestic biotech firms in China and India, this paper also offers micro-level insights on innovation capacity and economic development: (1) innovation capacity has become essential for domestic firms’ market success and (2) global institutional factors and national government policies on innovation have considerable influence on the choice of innovation at the firm level, i.e., to conduct indigenous R&D or to import foreign technology.

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Abbreviations

IP:

Intellectual property

IRIs:

Industrial research institutes

MNCs:

Multinational corporations

NDRC:

National development and reform commission (of China)

NIEs:

Newly industrialized economies

NIS:

National innovation system

PE:

Private equity

R&D:

Research and development

S&T:

Science and technology

SEZs:

Special economic zones

TFP:

Total factor productivity

TRIPS:

Agreement on trade-related aspects of intellectual property rights

TVEs:

Township and village enterprises

TPS:

Technology policy state

USPTO:

United States patent and trademark office

VC:

Venture capital

WIPO:

World intellectual property organization

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Acknowledgments

The author would like to acknowledge the funding support from Intramural Research Grant Program and the Centre for Advanced Study of International Development (CASID), Michigan State University and United Nations University-World Institute for Development Economics Research (UNU-WIDER) for this research. This study has been prepared within the UNU-WIDER project on the Southern Engines of Global Growth. The original version of this paper was presented at the UNU-WIDER Conference on Southern Engines of Global Growth: China, India, Brazil and South Africa in September 2007 in Helsinki, Finland. The author thanks UNU-WIDER for the logistic help, particularly the conference organizers, Guanghua Wan and Amelia Santos-Paulino, and appreciates the helpful comments from the conference participants. The author is grateful to two anonymous referees for their valuable comments on earlier versions of this paper.

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    Peilei Fan

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Fan, P. Innovation capacity and economic development: China and India. Econ Change Restruct 44, 49–73 (2011). https://doi.org/10.1007/s10644-010-9088-2

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