China’s Development Path: Government, Business, and Globalization in an Innovating Economy

Abstract

We employ the “social conditions of innovative enterprise” framework to analyze the key determinants of China’s development path from the economic reforms of 1978 to the present. First, we focus on how government investments in human capabilities and physical infrastructure provided foundational support for the emergence of Chinese enterprises capable of technological learning. Second, we delve into the main modes by which Chinese firms engaged in technological learning from abroad—joint ventures with foreign multinationals, global value chains, and experienced high-tech returnees—that have contributed to industrial development in China. Third, we provide evidence on achievements in indigenous innovation—by which we mean improvements in national productive capabilities that build on learning from abroad and enable the innovating firms to engage in global competition—in the computer, automobile, communication-technology, and semiconductor-fabrication industries. Finally, we sketch out the implications of our approach for current debates on the role of innovation in China’s development path as it continues to unfold.

Keywords: China, investment, infrastructure, knowledge, indigenous innovation, globalization, development

JEL Classification: D2, F2, F6, H1, H4, H5, H7, L1, L2, L5, L6, O1, O2, O3, O5, P1