The comparison of innovation activities and international trade effect in China and Japan in the era of knowledge economy

Purpose - The purpose of this paper is to examine the relationship between patent innovation activities and foreign trade competitiveness and analyze China's level of independent knowledge innovation internationally, especially in comparison with Japan. Design/methodology/approach - The approach takes the form of a statistical and econometric analysis of granted patents and trade export effect of China and Japan, based on the monthly data of foreign trade import and export and of patents granted by China's national intellectual property bureau in Japan and China, respectively, from 2004 to 2007. Findings - Through Johansen's co‐integration test, Granger causality test and other methods, this paper verifies that a country's inventions can directly promote export trade, and its pulling effect is more visible than the total patents. Tests also manifest that the innovative activities in Japan play a more significant role in enhancing its exports than in China. Comparison of large amounts of data shows that the gap between China and Japan on independent knowledge innovation is obvious. Research limitations/implications - These imply that in the era of knowledge economy, a country's sustainable capacity for independent innovation is the key to trade and national competitiveness. Practical implications - China urgently needs to build a national innovation system; make great efforts to cultivate national competitive advantage centred on knowledge advantage; and improve its overall competitive strength. Originality/value - The paper assesses the importance of innovation activities represented by patents from the quantitative view and the difference of impact degree between China and Japan.