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China’s Policy System for Enterprise Innovation: Phase-Specific Characteristics, Problems and Suggestions


By Li Zhijun & Lv Yan

Research Report Vol.18 No.1, 2016

Policies for enterprise technology innovation are those encouraging enterprises to carry out research and development activities, and to turn new knowledge or technology into new products or services in an aim to realize economic and commercial value of technology.

Based on China’s policy database for enterprise innovation (1978-2014), this paper, with measurement design of policy objectives and quantitative analysis, analyzes the evolution of target value transformation of China’s policy for enterprise innovation, and evaluates the current policy system[].

I. Policy Measurement and Research Design

Policies for enterprise technology innovation are important carriers of policy design and system arrangement. Quantitative statistical methods can be used to create measurement dimensions for relevant polices, and each dimension be can be treated with policy measurement, statistical analysis and design[]. To scientifically present the evolution of China’s policy for enterprise technology innovation, especially the change of their goals, this paper uses quantitative statistical method to establish a multi-dimensional and multi-level measurement framework, encompassing factors like policy level and validity into the measurement system.

1. Principles of policy measurement The quantitative statistical method regards every enterprise innovation policy as a unit, and design measuring rules based on the following principles so as to measure policies in a scientific and standardized way.

Principle 1: The level of policy effect should be consistent with that of policy type and of administrative power.

Principle 2: The level of policy effect is set by the decision-making department with the most administrative power.

Principle 3: Policy effect should be positively correlated with the number of decision-making departments.

Principle 4: When policy effect on a particular goal is measured, the more detailed policies are, the more effective they should be.

It is noteworthy that the effect of specific policies can be measured based on the first three principles respectively, but the relationship between the policies may be ignored. This problem can be circumvented by Principle 4, i.e. the more detailed policies are, the more they can play a promoting role, and the higher score they will get when policy goal orientation or details are measured.

2. Measurement design

(1) Measurement of policy effect. This paper designs the quantitative measuring standard of policy effect based on Peng Jisheng et al. (2008)[] . Policy effect reflects its importance. Therefore, the measurement can be based on the structure of China’s administrative power and policy forms, and the number of policy-makers has a positive correlation with policy effect. That more policy-makers are involved in making a policy indicates greater importance is attached to that policy which will be implemented in a more coordinated way. On this basis, we can determine the standard for assigning scores to policy effect for enterprise technology innovation (Table 1).

2. Measurement of policy goal orientation and policy instruments. Enterprise technological innovations arise regularly. Only under certain circumstances, will enterprises opt for technology innovation. The government should encourage more technology innovation by strengthening innovation sources, motivation, and capability, and improving innovation process, and determine key points of policies and policy mix based on the problems caused by market and system failures. The government policies aiming to promote enterprise technology innovation should include tasks, capability, motivation and basic conditions for innovation. The respective policy instruments are presented in Table 2. We use a five-score scale (5, 4, 3, 2, 1) to measure the effect of policy instruments. The more detailed and easily operable they are, the higher the score is. If no policy instruments are involved, the score is zero. Attention should be paid to the fact that entrepreneurship is not scored because it is not mentioned in China’s policies for enterprise innovation, which indicates the weakness of current policies because entrepreneurship is of apparent importance in technology innovation.

3. Design of policy statistical method

First of all, we score every innovation policy based on the above standard. Then we calculate the annual score of policy effect and policy instruments. The annual score of each indicator is the summation of the scores of each indicator of all policies issued in that year. ...

There were no innovation policies targeting directly at enterprises in China before 1978, and the government only laid out plans concerning enterprise technology innovation and transformation, which has had little impact on modern enterprise innovation. Therefore, policies before 1978 were not considered in this paper when the scores of all indicators are measured.

II. Phase-Specific Characteristics and problems of China’s Policy System for Enterprise Innovation

Since the reform and opening-up, China’s policies for enterprise innovation keep pace with the times; the policy goals are more suitable for our national conditions; the policy instruments are more diversified; and the policy system is more optimized.

1. Phase-Specific Characteristics of China’s Policy System for Enterprise Innovation

(1) Success has been achieved in changing the policy goal from improving the technical level of certain fields to enterprise innovative capability in a gradual way. In the early stage of reform and opening-up, enterprises in China were just production units in the national economy, and they only implemented national plans of technology innovation. In fact, it was not until 1992 that there was confusing understanding of many theories, which led to ambiguous expression of innovation policies. Thus, most innovation policies and measures exhibited dual-track features. At the phase, policies related to technology innovation were in the form of “plans” or “programs”, such as the policies for funding technology development or technology support policies for the industry, or policies for creating a favorable environment for technology innovation. Besides, enterprises were not the beneficiaries of such policies, so the main goal of policies during that phase was to improve the technical level of certain industries.

In 1992, China established the socialist market economy system, stressing that enterprises were the main players in market economy. Since then, the government began to attach importance to policies supporting enterprise innovation, and clearly stated that enterprises are main players in market economy. As a result, there are such policies directly supporting enterprise innovation. It has gradually become the goal and also the value orientation of successive policies to improve enterprise technology innovative capability. Compared with the past, China’s science and technology plans during this phase have changed a great deal because of the introduction of competition mechanism and the shift of policy focus to improving enterprise technology innovative capability. In particular, the state plans and projects give support in many ways, and technical support projects and scientific research bases are given the same importance. Moreover, priority is given to technology innovation in science and technology plans, and enterprises have become the implementers and participants of national innovation plans.

(2) China’s policy instruments are more diversified and policy system is more optimized. The pre- and post-1992 comparison of the scores for the number of policies (see Table 3), policy effect (see Table 3) and policy instruments (see Table 4) shows a clear upward trend of the number of policies, diversified policy instruments, and also a different structure of technology innovation, indicating a gradually optimized innovation policy system.

According to Table 3, the annual number of policies for enterprise innovation and their effect after 1992 exceed those before that year, as can be shown in the following line graph, which indicates China has been accelerating the promulgation and implementation of such policies. Before 1992, less than 8 such policies were released annually, most of which were science and technology plans or industrial policies. Although China had realized the significance of science and technology on the national strategic level, it failed to regard enterprises as direct or main beneficiaries of technology innovation in strategic thinking and practice. During that phase, a range of high-level and far-reaching technology innovation policies were issued, creating favorable conditions for building and optimizing the policy system for enterprise technology innovation. Since 1992, China has quickened up the pace of implementing technology innovation policies targeting directly at enterprises, with the number of such policies three times that before 1992, indicating the government has attached more importance to enterprise innovation and relevant policies.

2. Problems of China’s Policy System for Enterprise Innovation

In general, the Chinese government, since the reform and opening-up, has attached greater importance to enterprise technology innovation. In particular, since 1992, more policies have been issued to boost enterprise technology innovation, and there are increasingly more policies and policy-making departments as well as improved policy effect. However, in reality, enterprises are still weak in technology innovation, far from being as capable as what is expected in the policy goal. There are many reasons for policy failure. For example, policies are not continuous or timely; policy-makers have little say; and the policy structure is inappropriate. Details are presented as follows. ...

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