Globalization of R&D and China – Empirical Observations and Policy Implications

As one of the world’s largest recipients of Foreign Direct Investment (FDI), China is emerging as a key global player in Research and Development (R&D). This rapid increase in R&D investment is mainly attributed to the effort of strengthening the indigenous innovation capacity of domestic actors and, to an increasing extent, to the process of globalization of R&D with multinational enterprises as key driving force. This paper provides a detailed overview of the relative importance of foreign R&D in China based on quantitative mapping in terms of R&D inputs, outputs and local linkages in R&D-related activities, combined with an in-depth description of the nature of foreign R&D activities. Our empirical observation suggests that the growing importance of China in the globalization of R&D is more than a ‘flash-in-the-pan’. On one hand, China is facing new challenges, but at the same time is attempting to seize the “window of opportunity” to compete for knowledge and human resources through structural adjustments and new policy initiatives. On the other hand, multinational enterprises from OECD countries are not only intensifying, but also diversifying their activities in a larger number of R&D intensive sectors in China. In such a rapid and dynamic development, China seems to emerge not only as an important source of R&D but also a key magnet of global R&D operations.China; R&D; Globalization; Multinationals

THE ROLE OF SMALL FIRMS IN CHINA’S TECHNOLOGY DEVELOPMENT

Science & Technology (S&T) is high on the Chinese policy agenda but there are large uncertainties on the actual S&T development. For instance, previous studies tend to focus only on large and medium-sized enterprises (LMEs). The situation in Chinese small firms is far less explored. This paper aims to examine the role of S&T-based small firms. More precisely, we examine how much S&T that has been accounted for by small firms and how their S&T intensity differs across industries and ownership groups. We also analyze how various firm characteristics differ over size categories and S&T status. This study is based on newly processed micro level data provided by the National Bureau of Statistics with information on a large number of S&T indicators for small-, medium-, and large-sized manufacturing firms in China in 2000 and 2004. Our results suggest that small firms in Chinese S&T resemble their role in many other countries. They account for a comparably small share of total S&T and most small firms are not engaged in any S&T. However, those small firms that do engage in S&T tend to be more S&T intensive and have a higher output in terms of patents than larger Chinese S&T firms.Technology; SMEs; China; S&T; R&D

S&T activities and firm performance - microeconomic evidence from manufacturing in Shanghai

This paper examines the impact of R&D expenditure and technology import on the level and the growth of productivity, as well as on the general economic performance in manufacturing firms with various ownership structures in Shanghai, China. The empirical analyses are based on the firm-level information of a sample of manufacturing firms for the period 1998–2003. We find clear-cut evidence indicating that firms with foreign participation have a productivity advantage over their domestic counterparts. The expenditures on technology import not only have a direct and positive effect on productivity, but also indirectly enhance the absorptive capacity of firms to facilitate in-house R&D activities. This is particularly true for firms with foreign participation, or for firms in sectors with relatively high technical standards. Furthermore, R&D expenditure and technology import may also have positive effects on profitability and export performance, depending on the ownership structure of the firm and the technical standard in the sector.Science and Technology policy; Science and Technology investment; R&D

FDI, Market Structure and R&D Investments in China

FDI can be an important channel for developing countries’ ability to get access to new technology. The impact of FDI on domestically-owned firms’ technology development is less examined but it is frequently argued that technology externalities or demonstration effects could have a positive impact. Another and so far little examined effect of FDI on technology development in domestically-owned firms is through the impact on competition. We examine the effect of FDI on competition in the Chinese manufacturing sector and the effect of competition on firms’ R&D. Our analysis is conducted on a large dataset including all Chinese large and medium sized firms over the period 1998-2004. Our results show that FDI increases competition but there are no strong indications of competition affecting investments in R&D.China; FDI; Competition; R&D

Technology Development and Job Creation in China

This paper examines how Science and Technology (S&T) contribute to job creation in the Chinese manufacturing sector. The ambition of transforming China into an innovation-oriented nation and the emphasis on indigenous innovation capacity building have placed Science and Technology (S&T) high on the Chinese policy agenda. At the same time, the need for job creation is pressing, both to absorb the huge supply of underemployed people, and to enable the annual 20 million new labor market entrants to find employment. We examine the relationship between S&T and job growth in the Chinese industrial sector. S&T can be expected to have both positive and negative effects on employment. For instance, new technology might increase competitiveness and enable Chinese firms to expand their labor force. On the other hand, new technology might be labor-saving, thereby enabling Chinese firms to produce more output with fewer employees. Based on a large sample of manufacturing firms in China between 1998 and 2004, we analyze how S&T affect employment growth. Our results suggest that S&T activities have no effect on job creation.China; Science and Technology; Job-Creation

University–industry linkages and absorptive capacity: an empirical analysis of China's manufacturing industry

We analyze the contribution of universities to innovative performance in China’s manufacturing sector. Our empirical analysis is based on a matched dataset comprising about 20 000 large and medium sized companies aggregated at the three-digit industry level and information on university knowledge output for 31 provinces between 1998 and 2004. We show that universities’ impact on commercial innovation varies with the type of activity performed and is contingent on the manufacturing sector’s investment in absorptive capacity. In addition, our results confirm organizational theory stating that there is a complementary relationship between capabilities to acquire and assimilate external knowledge on the one hand and the capacity to transform and exploit this knowledge on the other

Exports as an indicator on or promoter of successful Swedish manufacturing firms in the 1990s

We study the link between exports and productivity at the firm level. Like in previous studies we get support for the hypothesis that more productive firms self-select into the export market. In addition, and contrary to many of the former studies, we also obtain evidence that exporting further increases firm productivity. Exporting firms appear to have significantly higher productivity than nonexporting. Moreover, exporters—mainly firms that increase their export intensities—have higher output growth than nonexporters. Reallocation of resources between firms may then have contributed to overall manufacturing productivity growth. Hence, we try to quantify the importance of reallocation

2006), ‘The role of small firms in China’s technology development

Our results suggest that small firms in Chinese S&T resemble their role in many other countries. They account for a comparably small share of total S&T and most small firms are not engaged in any S&T. However, those small firms that do engage in S&T tend to be more S&T intensive and have a higher output in terms of patents than larger Chinese S&T firms. JEL codes: O30, O31, O5

The Clean Energy Demo Zone as a Case of Cooperation between the European Union and China

This paper illustrates a model of cooperation between the European Union and China in the field of clean energy that the Europe-China Clean Energy Centre Project (EC2) is implementing through the creation of a Demo Zone. The Demo Zone is an urban area in a process of regeneration in which European policy experience and technological solutions related to clean energy are introduced, based on tools and methodologies successfully adopted in European demonstration projects. Faced by the common challenges and in the search for shared growth opportunities, the EU 2020 growth strategy for a smart, sustainable and inclusive economy and the green and low-carbon transformation of the Chinese economy outlined in China’s 12th Five Year Plan, have laid a promising common ground for the emerging EU-China cooperation framework, supported by both shared political aspirations and concrete collaborative actions. In on-going and future policy-driven and action-oriented cooperation between Europe and China, energy security and sustainable urbanization are identified as two focal areas where both sides see common strategic interests as well as mutual benefits. Given the challenges and opportunities inherent to the process of green transformation in China, and in particular in Western China, the clean energy Demo Zone that EC2 is developing in Urumqi, Xinjiang Region, represents a huge potential for cooperation between Europe and China both at policy and technology/business level. The European urban demonstration projects have been chosen by EC2 as a reference background for innovative energy and environmental strategies in Chinese cities. A Demo Zone Toolkit has been developed, i.e. a methodological set for public decision makers to govern urban projects, which have been tested in Europe with adaptations for the Chinese context. The key to this process is tackling the complexity of the urban demonstration setting using the right mix of innovative methods, which are well accepted by local stakeholders. Although the operation of the Demo Zone is still at an initial stage, the experience gained so far shows that this is a viable endeavour thanks to the strong support and commitment from both the Chinese and the European sides. This is facilitated by the role of EC2 as an effective and recognized platform for the dialogue between the Chinese and the European stakeholders, including public institutions, experts, research centres and businesses