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Making the Transition from Imitation to Innovation: An Enquiry into China’s Evolving Institutions and Firm Capabilities

  • Wendy Dobson

    (Institute for International Business, Rotman School of Management)

  • A.E. Safarian

    (Rotman School of Management)

How is the Chinese economy making the transition from imitation to innovation as the source of sustained long term growth? We address this question using the evolutionary approach to growth in which institutions support technical advance and enterprises develop capabilities to learn and innovate. Growth is seen as a series of disequilibria in which obstacles to innovation such as outdated institutions and weak incentive systems can cause growth to slow. We review existing literatures on institutions and firm behavior in China and compare these findings with those of our survey of Chinese firms in 2006. Industry and firm studies in the literature show how productivity is rising because of firm entry and exit rather than the adoption of new technologies. A striking feature both of the studies in the literature and our survey is the increasing competitive pressures on firms that encourage learning. Our survey of privately owned small and medium enterprises in five high tech industries in Zhejiang province found a market-based innovation system and evidence of much process and some product innovations. These enterprises respond to growing product competition and demanding customers with intensive internal learning, investment in R&D and a variety of international and research linkages.

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Paper provided by Rotman Institute for International Business, Joseph L. Rotman School of Management, University of Toronto in its series Working Papers Series with number 11.

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Length: 24 Pages
Date of creation: Mar 2008
Date of revision: Mar 2008
Handle: RePEc:ttp:iibwps:11
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