Abstract: China's Path to Indigenous Innovation

William Lazonick and Yin Li


In 2006 the Chinese government made the promotion of indigenous innovation central to its Medium- and Long-Term Plan for the Development of Science and Technology (2006-2020). This latest stage in China's growth builds on earlier policies that promoted infrastructure investments in China and technology transfer to China from abroad. The dynamism of the Chinese economy can be understood in terms of the combination of these three drivers of economic growth: infrastructure investment, technology transfer, and indigenous innovation. We argue that the foundations for China's growth have been the development and utilization of productive resources by the developmental state and innovative enterprise, working in combination. We outline the theories of the developmental state and innovative enterprise in order to frame the empirical analysis that forms the main body of the paper. We then provide empirical syntheses of research that documents the roles of the state in infrastructure investment and technology transfer, as well as the role of the enterprise in transforming technologies and accessing markets to generate innovation. In particular, we focus on the increasingly important phenomenon of "indigenous innovation" in China, whereby Chinese companies improve upon technology transferred from aboard to become important competitors in Chinese and global product markets.