Is R&D Upgrading China from Imitation to Innovation? An Institutional Analysis of Absorptive Capacity
Keywords:R&D investment - China - absorptive capacity - innovation - institution
With its massive investment in R&D, China is generally believed to be getting out
from the stage of little in-house R&D, building up more R&D capability quickly, and
will gradually become powerful in its own in-house R&D so as to remain globally
competitive with its own technology. This paper evaluates China’s innovation capability
at the firm level, with consideration of the overall situation of R&D activities carried
out by firms in China. It is true that many Chinese local firms have jumped from the
OEM stage to ODM stage, and many private and State-owned firms begin to have
heavy R&D investment as well. But these product design and R&D activities seem
to stagnate at a halfway level. Also some high-end R&D efforts seem to be shrinking.
Though most Chinese firms, through a long period of process of technological learning
and capability accumulation, finally begin to invest in R&D and carry out relevant
projects, the quality of R&D activities is not so well achieved. The low quality of
R&D investment of Chinese firms is due to the absence of absorptive capacity, i.e.,
the high quality external linkages established around Chinese firms, which in turn
impedes the efficiency and effectiveness of in-house R&D projects. Such an absence
of absorptive capacity or efficient innovation linkages has its institutional reason in
the Chinese context. Chinese policy makers shall deepen their perspective on the
so-called national innovation system, discover and tackle the real linkage problems
which are depressing China’s innovation capacity right now.
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