Science and Technology Takeoff in China?:
Theoretical and Empirical Perspectives
Gao Jian
Tsinghua University
Gary H. Jefferson
Brandeis University
Workshop on Global R&D in China
Nanjing, China
May 27-29, 2005
1
Has China begun its “Science and
Technology Takeoff”?
• Most large OECD nations experienced S&T takeoff
in which R&D/GDP rose rapidly from < 1% to > 2%.
• R&D/GDP has risen from 0.06% in 1996 to 1.3% in
2003.
• This is a measure only of R&D intensity, not quality
2
Scatterplot: R&D/GDP vs. log GDP/capita
3
S&T takeoff in 10 countries
(vertical axis: R&D/GDP)
4
Changes in firm-level R&D
intensity, 1995-2001
Distribution of R&D/VA (r), all L&M enterprises (%)
Year
1995
2001
0
79.8
70.9
%
-11.1
increase (45.6)
0<r≤1 1<r≤2 2<r≤4 4<r≤6 6<r≤10 r>10
7.2
3.2
3.4
1.4
1.7
3.3
6.7
4.0
4.8
3.0
3.5
7.1
-7.5
22.8
40.8
108.0
110.8
119.1
5
What factors motivate firms to spend more on R&D, i.e.
increase the ratio of R&D labor to the total workforce?
1. The demand for technology intensive intermediate
inputs
rises in relation to that of production labor,
2. The productivity of R&D labor rises,
3. The ability to convert the existing stock of knowledge
grow
into new innovations grows,
4. Subsidies to R&D labor increase.
6
#1. An increase in the share of GDP dedicated to
technology-intensive intermediate goods
Industry
Elec. and telecom
equip.
Elec. equip. and
machinery
Instruments and
meters
Total industry
R&D/VA R&D/VA R&D/VA
1995 (%) 2000 (%) 2000/1995
Sales
share
2000/1995
2.97
7.34
2.49
1.91
1.71
4.98
2.91
1.15
2.86
1.52
4.65
1.98
1.63
1.29
1.28
1.00
7
#2. The growing availability of complements to R&D personnel, i.e.
factors that significantly expand the productivity of R&D personnel
Human capital
Level of management’s education
% of workforce with foreign experience
% of workers using the internet
R&D network
Receive external R&D assistance
Provide design or R&D services
IT assets/total fixed assets
Institutional quality
Share of public ownership
Number of competitors
Purchase of outside technology
+
+
+
+
+
+
+
8
#3. Expanding the knowledge base from which
innovation (and imitation) is drawn: a quickening of
international technology diffusion
Measures of international
technology diffusion
Share of foreign ownership
(FDI)
Industrial park/export
processing zone
Purchase a foreign license
sign
+
+
+
9
#4. Deepening subsidies to R&D labor
City
Seoul
Shanghai
Guangzhou
Beijing
Chengdu
Tianjin
Estimated
returns to R&D
personnel ($)
(1)
37,639
24,086
14,984
13,479
9,676
8,818
R&D
personnel
wage ($)
(2)
20,847
5,655
3,249
3,494
3,102
1,569
ratio
1:2
1.81
4.26
4.62
3.86
3.12
5.62
10
Conclusions and discussion
Other factors affecting the timing of China’s S&T takeoff:
 Size – market size motivates investors to locate (achieve
scale economies) in China rather than depend on imports.
 Geographic location (e.g. proximity to Japan, S. Korea,
H.K., and Taiwan
 Domestic S&T policy, e.g. technology for markets
11
• The following slides are available for a
discussion session if relevant
12
Composite measures of city complementarities
lnZi = 1i + 2i LOCj + 3k INDk
Openness
(int’l tech
diffusion)
(1)
complementarities
Composite
measure:
Human
capital
(2)
R&D
network
(3)
Seoul
2.93
21.30
1.48
5.62
31.18
Beijing
0.00
0.00
0.00
0.00
0.00
Chengdu
-8.37
0.44
8.07
-2.79
-7.92
Guangzhou
6.71
1.06
3.25
4.52
6.63
Shanghai
10.65
1.38
8.46
7.48
25.15
Tianjin
-0.93
-6.30
-7.64
2.59
-10.76
Institutiona
quality
(1)+(2)+(3)+(4)
(4)
13
Composite measures of
R&D complements and estimated
returns to R&D personnel
City
Composite
Estimated returns
index of
to R&D personnel
complements to
($)
R&D
Seoul
31.88
37,639
Shanghai
25.15
24,086
Guangzhou
6.63
14,984
Beijing
0.00
13,479
Chengdu
-7.92
9,676
Tianjin
-10.26
8,818
14
composite measure of the MP of
R&D personnel
Relationship between returns to R&D and R&D
complements (R-sq = 0.910)
40000
35000
30000
25000
20000
15000
10000
5000
0
-20
-10
0
10
20
30
40
composite measure of R&D complements
15