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Innovation Capacity and Economic Development: China and India

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  • Fan, Peilei

Abstract

Both China and India, the emerging giants in Asia, have achieved significant economic development in recent years. China has enjoyed a high annual GDP growth rate of 10 per cent and India has achieved an annual GDP growth rate of 6 per cent since 1981. Decomposing China and India?s GDP growth from 1981 to 2004 into the three factors? contribution reveals that technology has contributed significantly to both countries? GDP growth, especially in the 1990s. R&D outputs (high-tech exports, service exports, and certified patents from USPTO) and inputs (R&D expenditure and human resources) further indicate that both countries have been very committed to R&D and their output is quite efficient. Both governments have played an essential role in transforming their national innovation systems so that they can be more adaptable to economic development. The main focus of their reforms has been to link the science sector with the business sector and to provide incentives for innovation activities. Balancing import of technology and indigenous R&D effort is another major theme. Innovation capability development has become more and more critical to the success of biofirms in India and China. Institutional factors have great influence on choice of innovation at the firm level, i.e., the decision at firm level in terms of indigenous R&D or import of technology. Nevertheless, limited financial resources and insufficiently qualified human resources remain two major challenges for domestic companies in both countries.

Suggested Citation

  • Fan, Peilei, 2008. "Innovation Capacity and Economic Development: China and India," WIDER Working Paper Series 031, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:rp2008-31
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    File URL: http://www.wider.unu.edu/sites/default/files/rp2008-31.pdf
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    References listed on IDEAS

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    1. Alwyn Young, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 641-680.
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    6. Katrak, Homi, 1998. "Economic analyses of Industrial Research Institutes in developing countries: the Indian experience," Research Policy, Elsevier, vol. 27(4), pages 337-347, August.
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    Cited by:

    1. Klimis Vogiatzoglou, 2009. "Determinants of Export Specialization in ICT Products: A Cross-Country Analysis," Working Papers 2009.3, International Network for Economic Research - INFER.
    2. Robert Kappel, 2010. "On the Economics of Regional Powers: Comparing China, India, Brazil, and South Africa," GIGA Working Paper Series 145, GIGA German Institute of Global and Area Studies.

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    Keywords

    China; India; innovation capability; domestic companies; ICT; biotech;

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