Do Manufacturing Firms in China Innovate?

Abstract

This article provides empirical light on the debate concerning whether manufacturing firms in China are becoming major innovators. Based on an innovation survey carried out in Jiangsu Province, the article finds that most firms engage in innovative activities but these are mainly of an incremental nature. Radical innovation, as a proportion of sales, is relatively low if compared internationally. Innovation in China is mainly to catch-up and is novel relative to the firm and the domestic market. A small proportion of innovation is new to the world. Intensity and productivity indicators suggest that small, foreign and textile firms are leading innovative efforts. Firms innovate to improve their general competitiveness, including improving product quality and extending market share, obtain income from technology and defend themselves from research and development expenditure by competitors. Innovators value significantly more than non-innovators the range of innovative objectives they seek to achieve. The main obstacles to innovation arise from technical and marketing weaknesses; the perception of these obstacles varies widely between radical innovators and non-innovators. The article concludes that while innovative activities are emerging it will still take some time for China to have a major role in the international division of innovative labour.

Key Words:

• Innovation
• innovation indicators
• innovation objectives
• innovation obstacles
• manufacturing industry
• China

Acknowledgement

The authors would like to thank the Maastricht School of Management's International Projects Department for making the field work for this study possible.

Notes

We are grateful to an anonymous referee for pointing this out.

In China, between 1998 and 2002, the proportion of state, collective and co-operative industrial firms fell from around 75% to 43%; the proportion of non-mainland and foreign firms increased from 16% to 19%; while the proportion of other forms of ownership increased from 9% to 39% (NBS, 2003).