Industrial Innovation in China

The Factors Determining Success or Failure

Zhenyu Fu

• Publisher: Routledge
• Year: 2021
• Print ISBN: 9781032072449
• eBook ISBN: 9781000453232
• Edition: 1
• Topic: Social Sciences
• Subtopic: Regional Studies
• Index: Social Sciences

This book, based on extensive original research, examines the factors which lead to successful innovation in Chinese industry. Considering the large and important Chinese mining industry in detail, it argues that innovation is key for success in all industries, not just new "tech" industries. It reveals how the interaction of universities, governments and industries is highly significant, considers how some parts of the industry, such as the mining and mineral processing stages, are more innovative than other stages, such as prospecting and mining equipment manufacturing, and suggests that this is explained both by the distance between final products and the market and commercialisation, and by the intensity of the interaction between the industrial company and the university or research institute. Throughout, the book includes examples and case studies to highlight the points made.

1 Introduction

DOI: 10.4324/9781003206101-1

In this chapter some theories will be introduced to familiarise the reader with the analysis tools adopted during this research, thereby removing barriers which might hinder understanding. Three academic streams will be reviewed concerning the innovation performance of a country and the roles of a variety of actors in relation to firms; the philosophy of these streams will run through the whole research, especially the case studies.

The theme of this book is technological innovation, and the central role of firms in the creation and diffusion of technological innovation has been recognised by almost all scholars in the field. However, no firm can finish the task of innovation by itself. A firm acts as the striker in a football match who delivers the final kick, but without assistance from the rest of his or her teammates, it would be difficult if not impossible for the striker to score. Various kinds of organisations take part in the innovation process; together with firms they constitute a system, and in order to comprehend the real innovation process it is imperative to look at the whole system.

From the 1990s onwards a theoretical approach called the National System of Innovation has been widely adopted by the academic community and policymakers. This research is also informed by this approach. Shortly after the birth of the National System of Innovation similar approaches were also proposed, such as a Regional System of Innovation and a Sectoral System of Innovation. The 21st century has seen the rise of two competing theories, i.e. the Triple Helix and the Innovation Ecosystem. Supporters of both theories agree with the systemic feature of innovation, but they have differing views regarding some issues. The Triple Helix theory will be reviewed first, as it will guide this research; the selection of cases and potential interviewees were decided in the light of this approach, while the conclusion takes note of some lessons to be drawn from it. The System of Innovation school will then be introduced, and its strengths and weaknesses discussed. Finally, an introduction to the Innovation Ecosystem will follow.

The Triple Helix (university-industry-government)

A brief introduction to the Triple Helix

The Triple Helix theory is the analytical tool used for this research, so it will be reviewed first. It originated via the development of a new knowledge production model called Mode 2 (see Gibbons et al., 1994). In this mode, not only academic institutes but also a variety of organisations that do not generally participate in knowledge production can begin to carry out the task of producing knowledge.

This mode extends the knowledge-production network, while the role of universities in this process is downplayed. Partly as a reply to this mode, the Triple Helix approach was proposed. The Triple Helix (TH)¹ model relocates universities to the centre of knowledge-production networks. In other words, the Triple Helix model regards the university as the core producer of useful knowledge, and gives due credit to the contribution made by the university to the advancement of human knowledge. It:

states that the university can play an enhanced role in innovation and increasingly knowledge-based societies. The underlying model is analytically different from the National System of Innovation approach, which considers the firm as having the leading role in innovation.

(Etzkowitz & Leydesdorff, 2000, p.109)

The reason for proposing a Triple Helix rather than a double helix is that ‘[w]hile a co-evolution or a double helix can be stabilized relatively easily, a complex and potentially unstable system emerges when three dynamics interact … The Triple Helix model is sufficiently complex to accommodate various forms of chaotic behaviour in the resulting system’ (Leydesdorff and Etzkowitz, 1996, p.281).

The TH model embodies some trends that are worth considering: (1) ‘Universities and industry, up to now relatively separate and distinct institutional spheres, are each assuming tasks that were formerly largely the province of the other’ (Etzkowitz & Leydesdorff, 1997); (2) ‘The role of government in relation to these two spheres is changing in apparently contradictory directions. Governments are offering incentives, on the one hand, and pressing academic institutions, on the other, to go beyond performing the traditional functions of cultural memory, education and research, and make a more direct contribution to “wealth creation”’ (ibid.); and (3) ‘In the old days, the transfer of knowledge produced by the university to its end-users took place through intermediate agents … Nowadays the university has become a direct producer of goods and services for end-users’ (ibid.).

The TH model helps scholars to deepen their understanding of universities in the modern world. Universities shoulder a third mission in addition to teaching and research (Etzkowitz & Leydesdorff, 1998, p.203); they have become involved in all kinds of business activities and have made direct contributions to countless innovations. Etzkowitz dubs this new form of academic research ‘entrepreneurial science’. Universities undertaking entrepreneurial science engage in economic development – in other words, the ‘capitalisation of knowledge’ (1998, p.824).

In this book, universities, industry and government will be regarded as the three core players in innovation activities, and the TH model will be adopted because it can incorporate the R&D carried out in academic institutions. In most case studies these three core players receive significant attention. According to Leydesdorff (2012, p.5), ‘the Triple Helix model enables us to consider empirically whether specific dynamics (e.g. synergies) among the three composing media² emerge at national and/or regional levels’.

Two kinds of Triple Helix

After reviewing the extant literature about the Triple Helix and in consideration of the case study design of this research, I would like to distinguish two kinds of Triple Helix model, one institutional, the other functional. In this I am indebted to Leydesdorff and Meyer (2006), who point out that the functions of university, industry and government in the Triple Helix are novelty production, wealth generation and public control respectively. The first three can be regarded as three kinds of institutions, and therefore we can dub the university-industry-government Triple Helix as an institutional example. However, in reality, in some successful innovation stories one or even two of the helices may be missing. For instance, universities have little direct impact on equipment manufacture. Under such circumstances, the functional Triple Helix works. This focuses upon the three functions of novelty production, wealth generation and public control. As long as all these functions can be performed, a complete Triple Helix interaction emerges. Sometimes the university as an institution is missing and sometimes the government may be absent, but their missions have been shouldered by others, which means that a functional Triple Helix has been constructed.

My case studies demonstrate that this second form of Triple Helix encompasses the essence of the model. One explanation as to why the institutional Triple Helix is more popular is that ‘[u]nlike institutions, functions are not observable without taking a reflexive turn, that is, without some specification of selection environments in terms of expectations’ (Leydesdorff & Meyer, 2006, p.1442). Shifting the focus from formal institutions to necessary functions for the completion of innovation can help a researcher better understand the nature of an innovation process.

In conclusion, the forms of Triple Helix models may vary across different countries, industries and different parts of the value chain. Their nature, however, remains unchanged. All Triple Helix models describe how useful knowledge is produced after the performance of the three core functions, i.e. novelty production, wealth generation and public control. For proponents of the Triple Helix model, these three functions are the quintessence of an innovation action, rather than the actual performers of the functions.

The functions are also necessary dimensions of most, if not all, innovation processes. This model can help researchers to understand a specific innovation process from three different angles provided by the three dimensions. What is being created and how this is being done determine the co-ordinates of a Triple Helix along each of the three dimensions. Thus, this model is also useful for conducting comparison studies between different innovations. Researchers can create a three-dimensional co-ordinate system consisting of novelty production, wealth generation and public control, and innovations can be located in this system for comparison. One innovation might contain more wealth generation elements, while another might contain more novelty production elements. The structure of the case studies in this research will be framed according to the idea of the Triple Helix model, and the two kinds of Triple Helix will also be demonstrated in greater detail.

Bearing this in mind encourages researchers to recall that innovations are either being done by at least these three bodies, or they can be completed by performing three functions. In the context of this study of the Chinese mining industry, identifying which kind of Triple Helix applies to innovation in this system is an important task, helping to locate problems and thereby leading to future progress.

Systems of innovation

The National System of Innovation (NSI)

According to Christopher Freeman (1995, p.5), the first to use the term ‘National System of Innovation’ was Lundvall. However, in published form the term was first used by Freeman himself in the book Technology Policy and Economic Performance, Lessons from Japan (Freeman, 1987). As a result, the academic community credits Freeman with coining this expression. In fact, the concept goes back to Friedrich List (1984), who at that time was thinking about the method Germany might use to overtake Britain. He was in favour of infant industry protection policy, a major part of which was learning new technology and applying it.

In the 1990s there were two influential monographs concerning the National System of Innovation; one was National Systems of Innovation: Towards a Theory of Innovation and Interactive Learning edited by Bengt-Åke Lundvall (1992), and the second was National Innovation Systems: A Comparative Analysis edited by Richard Nelson (1993). The 2008 book Small Country Innovation Systems, Globalization, Change and Policy in Asia and Europe, edited by Charles Edquist, provided the latest approach to studying NSI. These three books articulate different perceptions of the same term, but they do not contrast with each other. In fact, they complement each other in many respects.

In his book Freeman defined the National System of Innovation as ‘the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies’ (1987, p.1). His theory identifies and studies major actors in this system. Compared with previous theories, it placed innovation in a wider purview, thus contributing to a better understanding of this critical process. By paying attention to innovation networks, the nature of innovation can be demonstrated more clearly.

Furthermore, from the very beginning of the study of NSI it has been clear that it has policy implications. Government policy plays a pivotal role in shaping a country’s NSI, and many countries have experienced this. This suggests new rationales and new approaches for government technology policies (OECD, 1997). To sum up, as the first attempt to use NSI as an approach to innovation, while very rudimentary, Freeman’s book was a pioneering work, and almost all later studies in this area make reference to it.

Lundvall’s was a more theoretical approach. It first makes a distinction between a System of Innovation in the narrow sense and a System of Innovation in the broad sense. The narrow definition includes ‘organisations and institutions involved in searching and exploring’ (1992, p.12), while the broad definition ‘includes all parts and economic structures and the institutional set-up affecting learning as well as searching and exploring’ (1992, p.12). The core concepts in this book are knowledge and learning; Lundvall argues that:

the most fundamental resource in the modern economy is knowledge and accordingly, that the most important process is learning … it is assumed that learning is predominantly an interactive and therefore, a socially embedded process which cannot be understood without taking into consideration its institutional and cultural context.

(Lundvall, 1992, p.1)

Lundvall’s book provides theoretical groundwork for incoming NSI studies, and exposes the nature of innovation.

Nelson’s edited book consists of 15 case studies ranging from large high-income countries such as the US, Japan and the UK to low-income countries such as South Korea, Brazil and Argentina. It is much more empirical than Lundvall’s. In the first chapter Nelson gives his definitions of ‘innovation’, ‘systems’ and ‘national’. The system concept, according to Nelson, is ‘a set of institutional actors that, together, plays the major role in influencing innovative performance’ (Nelson, 1993). No matter which country is discussed, the authors are mainly concerned with formal actors. In other words, it was the formal institutions that caught the attention of the contributors to Nelson’s book, unlike Lundvall’s work. In talking about the ‘major institutional actors’, the book mainly discusses firms, industrial research laboratories, universities and public laboratories. Each chapter only sheds light on the important formal institutional actors involved.

Edquist’s book is quite different from the two previous ones. Edquist classifies Nelson’s and Lundvall’s ways of studying NSI as traditional approaches (Edquist, 2008). The approach Edquist adopts is called ‘An Activities-based Framework for Analysing SI’. To be more specific, ‘the main or overall function of SI is to pursue innovation processes: to develop and diffuse innovation’ (Edquist, 2008, p.7). Activities here refer to those factors that influence the development and diffusion of innovations. Compared with Nelson’s and Lundvall’s work, Edquist ‘focuses strongly on what happens in the systems—rather than on their constituents³—that it thus uses a more dynamic perspective’ (Edquist, 2008, p.7).

This perspective helps readers to better understand the functions of different components of an NSI, because it deals with actors in motion rather than static actors. Different NSIs often have the same components, but these components might not function in the same way. Sometimes a component is designed to perform a specific task, but in reality it may deviate from its basic task and take on other responsibilities. Only by observing and analysing acting components can we gain meaningful knowledge of these components. In addition, activity-based studies are more conducive to show the interactions between constituents of the system, which are as important as the constituents themselves, if not more so. The so-called traditional approaches to studying NSI are weak in this respect. However, by concentrating on activities of the system, Edquist...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of illustrations
• Acknowledgement
• Preface
• 1. Introduction
• 2. An empirical study of the Chinese mining industry
• 3. A cross-country comparison
• 4. Case studies
• 5. Policy implications
• 6. Conclusion
• Bibliography
• Index