State Policies, Enterprise Dynamism, and Innovation System in Shanghai, China

ABSTRACT Today rapidly growing economies depend more on the creation, acquisition, distribution, and use of knowledge. As such, strategies for enhancing research and innovation capabilities have come to occupy a more important position in many developing nations, including China. Already the leading production center, and often seen as China's economic locomotive, Shanghai is striving aggressively to retain its national preeminence and has launched concerted efforts to increase local innovative output. The primary purpose of this paper is to understand how state‐led efforts have fared in promoting technology innovation. By situating the city in the national and global context, the paper shows that Shanghai has gained a substantial lead in developing an innovation environment with extensive global linkages and leading research institutions. Recent efforts in building up the research and innovation capacity of the enterprise sector have begun to show progress. Although firms are enthusiastic about its future as an innovation center, Shanghai continues to face challenges of inadequate protection of intellectual property, lack of venture capital investment, and the tightening supply of highly qualified knowledge workers.