Transcript The National Innovation System of China -

Transformation of NIS in China
in market reforms: 1980s-1990s
• NIS as Analytical Instrument
• NIS Transformation in China—the process
• Re-combination Learning
-- Intensive learning in micro-foundations
• Discussion and summary
** Questions:
Why does a gradual process work? (“policy learning”)
Why development paths differ?
** Key words:
Policy Process; Micro-foundations of IS
June 2008
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What are national innovation systems?
• National Innovation systems are defined as the
“...set of distinct institutions(1) which jointly and
individually contribute to the development and
diffusion of new technologies(3) and which provide
the framework (upon) which governments form and
implement policies(5) to influence the innovation
process. As such it is a system of interconnected
institutions to create, store and transfer the
knowledge, skills and artefacts(4) which define new
technologies. (Metrcalfe 1995)
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What are national innovation systems?
• From this perspective, the innovative performance
of an economy(6) depends not only on how the
individual institutions (e.g. firms, research institutes,
universities) perform in isolation, but on “how they
interact with each other(2) as elements of collective
system of knowledge creation and use, and on their
interplay with social institutions (such as values,
norms, legal frameworks)”. (Smith 1996)
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What are national innovation systems?
• (1) Set of distinct institutions
• (2) Interact with each other
• Actors, institutions, their operation and
interactions
• (3) Development and diffusion of new technologies
• (4) knowledge, skills and artefacts
• Functions: development and use of knowledge and
technologies
• (5) Policies
• Policy institutions and impact of policy on NIS are
added as central
• (6) Innovative performance of an economy
• In order to explain innovation performance of an
economy
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NIS as Analytical Instrument
• The importance of institutions—defines incentives and the pattern
of information flows
• Interaction/interactive learning—between producer and user, and
between technology and institutions; interactions drive dynamic and
complex innovation and change
• “Systems” for innovation—R&D institutions along are not
innovation systems; firms alone can not innovate.
• The importance of policy and policy institutions—policy
process determines the outcome of reform programme; “Interaction
between policy and the work of NIS”
• Development is a process combining effective use of
existing recourses and new resources and “variety” creation
• Explanation of performance of aggregate social system via
survey on micro-foundations
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International Trade and
Politics Context
Global Innovation Networks
Macroeconomic and
regulatory context
Education and
training system
Knowledge generation, diffusion and use
Communication
infrastructures
Firms' capability
and networks
Other
research
bodies
Science
system
Supporting
institutions
Product market
conditions
CLUSTER OF INDUSTRIES
REGIONAL INNOVATION SYSTEMS
NATIONAL INNOVATION SYSTEMS
Factor market
conditions
INNOVATION PERFORMANCE
(Development and Growth, job creation, competitiveness)
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Evaluation Criteria on NIS Transformation
Openness
For the vitality of NIS
--In various forms:
Technology Licensing; Procurement of capital goods; FDI; OEM Assembly;
Sample Machine import
Incentives
Clustering
Supporting
institutions
S&E base
Learning
dynamics
June 2008
--Strength
--Orientation (to innovation or to quantitative expansion)
Characters of interaction between system’s members
--Vertical (I-O relation) and horizontal relations
--Structure (vertical integrated or network-based) and
operational norms of firm
Embody knowledge flows, mediate clustering/linkages
--via planning apparatus or market mediation
--Interaction/coordination channels
--Legal, educational, technological infrastructures
Competence structure and innovation potentials
--Strength and specialized pattern of knowledge creation
--Intensity and responsiveness to the need of firms
How the innovation “dynamo” firms learn and innovate
--Models of learning
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R&D
of
N. Year
R&D of GDP
Income
1953
0.1
1.5
1978
1954
0.2
1979
1.5
1955
0.3
1980
1.5
1956
0.6
1981
1.3
1957
0.6
1982
1.3
Those at the levels above “county”: 5,793 1958 1.0
1983
1.4
1959
1.6
1984
1.4
Those at the county level: 3,360
2.8
1.2
1960
1985
1961
2.0
1986
1.3
1962
1.5
1987
1.0
1963
1.9
1988
0.8
1964
2.1
1989
0.8
A
2.0
1990
0.8
B 1965
TL, PE, FDI + academic
TL, SMP
1.6
1991
0.8
1966
exchange
1967
1.0
1992
0.7
R&D Institutes and
R&D Institutes
Capital Goods
Capital
goods
1968
1.0
1993
0.7PE, FDI, TL
Universities
Industries
Industries
1969
1.5
1994
0.7
1970
1.6Domestic Manufactures
1995
0.6 OEM
Domestic Manufactures
1971
1.8
1996
0.6
Domestic Market
1972 Domestic
1.7 and International Markets
1997
0.6
1973
1.5
1998
0.7
TL: Technology Licensing PE: Procurement of Equipment
1974
1.5
0.8
1999
SMP: Sample Machine Procurement
1975
1.6
Transformation
of the2000
China’s0.9
NIS
FDI: Foreign Direct Investment OEM: OEM Assembly
1976
1.6
2001
0.95
**Vertical information flows
1977
1.6
2002
1.07
** Slow and rigid top-down policy process 1978 1.8 (1.5 of GDP) 2003
1.13
2004
1.23
** Weak
incentive
to qualitative change
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1.42
2006
but strong to quantitative expansion
The Pre-reform system
and R&D Portfolio
R&D establishments: total 9,153
S&E: total 343 thousand
In which who work in the first
category: 319 thousand .
Year
Information flows
The Ministry of Machinery Industry
Other Sectoral
Bureaus
Bureau of Machine Tools and
other Tools
Department of Science
and Technology
8 R&D Institutes specifying
in manufacturing
technology
191 R&D Institutes specifying in product
technology
**Vertical information
flows
Production Factories specifying in product
** Slow and rigid topdown policy process
Di stri buti on of Innovati on Acti vi ty (1985)
** Weak incentive to
qualitative change but
strong to quantitative
expansion
Basic Research
Applied Research
Experim ent Developm ent
Design and Production Engineering
Diffusion and Technical Services
Production
0
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Cent ral R&D Inst it ut es
10
20
30
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Local R&D Inst it ut es
40
50
9
Rapid growth in the past 20 years……
1979-2003 Average annual growth rate 9.4%
• √Pragmatic trial and error
reform policy-making
Figure 1 Per Capita GDP in Comparison, USA=100
140
120
100
USA
• =Participation in the global
80
UK
economy and re-allocation of
Japan
60
China
production from Asian tigers
40
Korea
• √Re-deployment of
20
accumulation production and
0
1820
1870
1900
1913
1950
1973
1992
design/testing capabilities
GDP Structure of China's economy at constant prices
• Ethnic ties of overseas Chinese
100%
• =High saving and investment
80%
Services
rates
60%
Industry &
• =Local governments’
40%
construction
entrepreneurial involvement in
Agriculture
20%
growth and industrial projects
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Academy
10
• Other
factors (cultural,..)
1890
1952
1978
1995
“Opening the door”
Participation in global value chains and manufactured
exports
Export Structure
Source: reproduced based on Wu 2004 Table 8.7
100%
15.7
Openess to Global Economy
80%
60
4.7
22.1
50
60%
12.7
2.8
31.1
33.1
39
17.1
16.3
10.2
8.8
2000
2002
20.4
9
21.1
20.3
40%
%
34.6
16.4
40
30
36.7
21.1
20
20%
50.2
50.6
25.5
14.4
10
0%
0
1978
1989
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1997
2002
2003
1980
1985
1 Primary products
1990
1995
2 Chemicals
3 Light & textile products
4 Electric & machinery products
5 Miscellaneous incl. Apparel
6 Other products
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Domestic market: investment and expansion
the high investment rates annual 30-40%
7000
10000
Growth in representative products
9000
Source: China Statistical Yearbook 2004 Table 14-20
http://www.stats.gov.cn/tjsj/ndsj/yb2004-c/indexch.htm
8000
6000
5000
7000
6000
4000
5000
3000
4000
3000
2000
2000
1000
1000
0
0
1978 1980 1985 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
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Air-conditioner 10000 set
Color television 10000 set
Rolled steel products 100000 ton
Cement 100000 ton
Passenger car 1000 set
Microcomputer 10000 set
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Pragmatic reform policy-making;
Re-deployment of accumulation production and design/testing capabilities,
meeting with the opportunity from Asian “tigers” production Re-allocation
• Agricultural reform since 1979
• Industrial and urban reform
since 1984
=>“Bureaucratic decentralization”
=>“Incremental reforms”
• S&T management system
reform since 1985
Ownership structure: Industry
100%
90%
44505
80%
70%
123393
60%
44358
50%
40%
30%
38581
20%
10%
53408
34248
0%
Firm number
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Turnover
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R&D system Transformation
in China: The policy process
1985
Technology Market (1)
1987
Merger (2)
of R&D institutes into firms
The Torch Programme
Spin-off Enterprises and New and High
Technology Industry Zones (3)
Transformation of R&D institutes on a whole
institute basis (4)
1988
Early 1990
1999
June 2008
Clarify and legitimate upon real progress of
transformation
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Result: Multiple Policy Solutions
（All the measures at current price）
(1) Technology Market
Contract fees (RMB Billion)
(3) Spin-offs
Number of NTEs
Annual turnover (RMB Billion)
Export (USD Billion)
R&D Performer (%)
Enterprises Independent
R&D institutes
Universities
1985
1990
1995
2000
2.30
7.51
26.83
65.07
-
1,690
5.94
0.69 (RMB B.)
12,937
151.2
1.55
20,796
920.9
13.81
(1987)
n.a.
43.7
29.3
n.a.
42.1
54.7
n.a.
12.1
15.9
Official registration on transformation, By 2000
(2) Merger…………………………………..311
(4) Transformed to be profitable entities…629
(others) Become a part of University………24
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60.0
28.8
8.6
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“Recombination Learning” in Market Reform
Four Parallel Processes
1, Market reforms
=>produce new incentives and induce innovative
capabilities reallocation;
2, Re-organization of accumulated capabilities
=>in novel and productive ways;
3, Intensive technical/managerial learning
=>to identify and fill major gaps in inherited
capabilities; and
4, Institutional restructuring
=>that support these developments.
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“Recombination Learning” in Market Reform
Example Sector PC
Machinery
Textile
Technological
gaps
--Product
architecture
--Design engineering
--Production Engineering
--Design
--International marketing
Means filling the
gaps
--Use and sales of
advanced products
--Technology licensing
--OEM production
Accumulated
capabilities
--Design
--Testing
--R&D
--Production
--Design
--Testing
--Production
--Production
Institutional
restructuring
--Spin-offs
--Transformation of R&D
institutes
--Transformation of state
enterprises
--Export-production
Zones
--Joint-ventures
--Local Small startups
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Evaluation of NIS Transformation in China
Supporting/Coordination Capacity ＋－
Science and Engineering Base ＋－
(A “shallow” structure of innovation competences)
Learning Dynamics ＋
Year 1
(1) R&D expenditure Billion (GDP%)
1987
5.67 (1.0%)
Year 2
2000
89.6 (1.0%)
(1.1) Basic Research %
7.7
5.2
(1.2) Applied Research %
32.1
17.0
(1.3) Experimental Development %
60.2
77.8
(2.1) SCI International Rank
1987
(2.2) ISTP International Rank
14
8 (India 23) (Russia 7)
(2.3) EI International Rank
10
3 (India 12) (Russia 9)
(3)Patents, USPTO granted Number: China
41
1999 10 (India 13) (Russia 8)
2001
India
24
179
Russia
67
239
S. Korea
586
3,763
Taiwan
June 2008
1992
24
1,252
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266
6,544
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Evaluation of NIS Transformation in China
Openness ＋＋
Incentives ＋＋
Clustering ＋ (in relation to industry structure and firm structure)
1985
1990
1995
2000
Import of capital goods (USD Billion)
16.24
16.85
52.64
69.45 (1999)
FDI (USD Billion)
1.96
3.49
37.52
40.72
A TL, SMP
B
TL, PE, FDI
TL, SMP
R&D
Institutes
Capital Goods
Industries
Domestic Manufactures
R&D
Institutes and
Universities
Capital Goods
Industries
Domestic Manufactures
Domestic Market
Domestic and International
Markets
TL: Technology Licensing
SMP: Sample Machine Procurement
PE: Procurement of Equipment
Transformation
FDI: Foreign Direct Investment
OEM:
OEM Assembly
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PE, FDI, TL
OEM
of the China’s NIS
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Questions
1. Why does a gradual process work?
2. Why development paths differ?
3. What characterizes a "less developed country"
NSI as compared to a rich country NSI?
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Why does a gradual process of reform work better in
China in comparing to the more sudden reform in Russia?
• “Unintended fit” needs the feasibility of adaptation for policy
and for system’s actors
-- Experimentation generates knowledge and information to reduce uncertainty
** Such information and knowledge serve as input into policy-making and in
strategic adjustment at firm/R&D institute;
** This paves ways not only for policy adjustment but also pointing to where
firms/R&D institutes to move for survival and further growth
• Preconditions
--Adaptive/responsive policy-making
--Strategic vision as a general guidance
--Consensus and Political stability: “controlled chaos”
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Comparison between a gradual process (China)
and a “Shock therapy” (Russia)
R&D Systems in Comparison: Russia and China
250
200
150
Russia R&D Personnel
Russia GERD
100
China R&D Personnel
China GERD
50
0
start
the 1st year
the 2nd year
the 3rd year
the 4th year
the 5th year
the 6th year
the 7th year
the 8th year
1990/1987
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The Reining Paradigm Washington Consensus:
Why does SAP Programme fail?
(Rodrik 1995; Friis-Hansen (ed.) 2000; Barrett, Aboud, and Brown 2000; McMillan, Rodrik, and Welch 2002)
• Theoretical rationale: ‘getting the prices right’ --namely,
let the current international prices bring developing economies
towards the status of general equilibrium
• Policy Measures:
--Feeing prices via tax and subsidy reduction
--Privatization of land, factories and trade
--Cuts in public expenditure including infrastructure services
• Pragramme Operation/implementation
--One set of policies put into a great variety of situation
--External experts dominate SAP implementation
--Conditional: Acceptance of SAP to be necessary condition for
international loans
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The Reining Paradigm Washington Consensus:
Why does SAP Programme fail?
(Rodrik 1995; Friis-Hansen (ed.) 2000; Barrett, Aboud, and Brown 2000; McMillan, Rodrik, and Welch 2002)
** A large part of technical persons for agricultural-tech diffusion were dropped out
** Road and irrigation infrastructure in disrepair or disappear
** Supply of agricultural inputs turned to the hands of multinational companies; while
the coverage of the supply remains for 2%--4% peasants
** Upstream and downstream industries of agriculture largely secede to operate
because of “comparative disadvantages”
Effects on Development
in Long-term:
degradation of production system
and innovation system, except for a
tiny part that integrated into international
production
In Short-term:
also minimal, from low responsiveness
June 2008
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of the Academy
supply
side
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The Reining Paradigm Washington Consensus:
Why does SAP Programme fail?
(Rodrik 1995; Friis-Hansen (ed.) 2000; Barrett, Aboud, and Brown 2000; McMillan, Rodrik, and Welch 2002)
• Effects in policy learning
** Telling-Failures with no progress in policy capacity
“In face of wide dissatisfaction with the SAP, most of the debates go merely
around as ‘Some feel that privatization and liberalizations have not been
pushed far enough; and others believe that it has been pushed too far too fast”
(Friis-Hansen (ed.) 2000).
** Policy consideration fetched outside endogenous learning
and ignored local conditions
The viability of a version of agricultural modernization based on high levels
of external inputs, as the current reform programmes …imply to achieve, is
questionable. ‘Low external input sustainable agriculture’ (LEISA) strategies
are indispensably needed to integrated pest management, participatory
conservation and use of plant genetic resources, and integrated soil fertility
management’, this is absent in the SAP discussion.
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Increasingly knowledgeable and concerned
people criticize Washington Consensus……
“An Agenda for the New Development Economics”
Joseph E. STIGLITZ, at the UNRISD meeting on The Need to Rethink
Development Economics, 7-8 September 2001, Cape Town, South Africa.
The seeming disappearance of development economics as a
separate discipline some quarter century ago could not have
come at a more inopportune time. Some of the criticisms…are
valid …But their argument that developing countries are just
like more developed countries, only lacking as much physical
(and later,….human) capital and their assumption that
competitive equilibrium theorem can be applied in a
straightforward way is, if anything, even more misguided.
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Joseph E. STIGLITZ 2001
In the last two decades, there has been a growing awareness of
the limitations of the competitive paradigm…Yet, in this same
period, the reigning paradigm in development economics was the
Washington consensus, which ignored these considerations,
despite the fact that they are even more important to developing
countries.
A new development agenda thus must center around (i) identifying
and explaining key characteristics of developing countries,…and
exploring the macro-economic implications…; (ii) describing the
process of change, how institutions and economic structures are
altered in the process of development….It must do so in light of
changes in the global economy…
……with an evolutionary foundation and accumulated
knowledge and methodology, the IS approach will
contribute substantially to the issues centered in the new
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development
agenda.
Why development paths differ?
• Co-evolution between policy, institution and
technological opportunities
• Historically rooted characters
• Path-dependency: cumulative and selfreinforcement of initial choice
Korea versus Chinese Taiwan: e.g. in strength of central
power
China versus India: e.g. in learning/cultural preference;
English language capacity
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Differing NSI: Korean and Chinese Taiwan
NIS characteristics
Korea
Taiwan
Learning at individual large firms
Small firm network-based learning
Learning
mechanism
Cyclic reverse traveling up
the capability ladder
High entry and forward and
backward linkages
Community of
learning practice
Individual firms
A group of firms
Priority of S&T and
industry policy
“Picking the winners” to give
direct support
Invest in infrastructure and
neutral regulatory stipulation
Supporting
institutions
Location of R&D
Provided by firms themselves
under the close alliance with
the government
80% at private firms
Network, technological
infrastructure; market friendly
regulatory institutions
50% in public institutes
Technological
strengths
‘Mass’ technology, large
systems
‘Niche’ technology, small
systems
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Differing NSI: China and India
Both are in transition: Selected indicators
Year 1
(1) R&D expenditure Billion (GDP%)
1987
5.67 (1.0%)
Year 2
2000
89.6 (1.0%)
(1.1) Basic Research %
7.7
5.2
(1.2) Applied Research %
32.1
17.0
(1.3) Experimental Development %
60.2
77.8
(2.1) SCI International Rank
1987
(2.2) ISTP International Rank
14
8 (India 23) (Russia 7)
(2.3) EI International Rank
10
3 (India 12) (Russia 9)
(3)Patents, USPTO granted Number: China
1992
24
41
1999 10 (India 13) (Russia 8)
2001
India
24
179
Russia
67
239
S. Korea
586
3,763
Taiwan
1,252
6,544
266
While China becomes an emerging manufacturing center; India
shows
growth in software
Junerapid
2008
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What were the main difficulties in the
transformation of China's NSI?
• Institutional/system inertia
Necessary consensus for reforms
Need centralized top-down decision
Great uncertainty associated with social
innovation
Need flexibility for experimentation
 Need bottom-up feedback and “horizontal”
referring of applicable practice
June 2008
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31
Transformation of NIS in China
in market reforms, 1980s-1990s
• NIS as Analytical Instrument
• NIS Transformation in China—the process
• Re-combination Learning
-- Intensive learning in micro-foundations
• Discussion and summary
** Questions:
Why does a gradual process work? “policy learning”
Why development paths differ?
** Key words:
Policy Process; Micro-foundations of IS
June 2008
Shulin Gu Globelics Academy
32