A Review of Innovation in Chinese Firms over the Last 40 Years: Navigating the Winding Road toward Innovation

  • 05 19, 2020
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  • Author:Yuan Li, Zelong Wei

  Abstract

  In this paper, we review the innovation experiences in China from 1978 to 2018 across four unique stages. Our analysis of these four stages allows us to offer suggestions for future innovation in this country. First, we describe the innovation strategy, innovation performance, and limitations during each stage. Innovation in China was initially motivated by a shortage of food and other necessities of life. The transition from a centrally planned economy to a market-oriented economy created learning opportunities to promote innovation based on absorptive capacity. As latecomers, Chinese firms have endeavored to catch up with innovation leaders from developed countries, with some gaining an innovation-based global competitive advantage. However, most Chinese firms are still lacking in core technology.

  Second, we summarize the innovation characteristics of Chinese firms over the last 40 years. Despite their increasing innovation capability, they have just begun their journey toward real core innovation. Most Chinese firms are short of core technology. As cost advantage decreases, more firms proactively invest in endogenous innovation to create new advantages.

  Third, we provide suggestions for future innovation practices, academic research, and research policy. In the future, Chinese firms should pay more attention to the innovation ecosystem, digital innovation, and business model innovation. Chinese governments at different levels should make more efforts to build a new ecosystem based on socialism with Chinese characteristics. Furthermore, future academic research should emphasize the unique characteristics of innovation in China and the innovation ecosystem.

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