China’s innovation amid profound global changes

By SU JINGQIN and GAO XIN / 12-02-2021 / (Chinese Social Sciences Today)

The establishment of the Beijing Stock Exchange implements the national strategy of innovation-driven development. Photo: PROVIDED TO CSST  

Under profound changes unseen in a century, proactively exploring and theorizing the innovative path with Chinese characteristics prove not only the inner drive for the high-quality transformation of China’s economy, but also the significant means of local enterprises to move toward higher value-added GVCs and to increase their global competiveness.   

Unique and complex local context
Innovation, in essence, is an exploratory activity that breaks away from conventions, which is embodied in the process that enterprises shape new resources and capabilities through a series of strategic decisions under the common influence of multiple situations.
At present, a large number of leading enterprises in China have demonstrated their vigorous innovation and a “catching up and surpassing” path that is different from Western enterprises. However, few experiences of “Chinese innovation” with local characteristics have been summed up nor received wide recognition. The fundamental reason is the lack of systematic exploration of the unique external situational characteristics of China’s innovation.
First, the uniqueness of local situational elements has not been deeply explored. For example, China’s huge market once made “trading market for technology” the only way for local enterprises to develop. However, against the backdrop of consumption upgrading and diversified market levels, a large number of leading local enterprises have developed a vertical and high-end market expansion path in the segmented market. In terms of technology, the lack of underlying architectural technologies and the enrichment of applicational technologies coexist. 
Second, the complexity brought by the dynamic changes and combinations of multiple situational elements in China has failed to be clarified. Existing research demonstrates a static perspective on situational assumptions, ignoring the impact of institutional vacancy or flexibility in other stages of enterprise development. Furthermore, existing studies have ignored the systematic role brought by the combinations of situational factors such as the institution and the market. When enterprises face different situational combinations such as dual institutional and market constraints or dual institutional and market supports, they will inevitably make different choices in terms of innovation path. Therefore, based on the multi-dimensional understanding of local situational elements, “Chinese innovation” naturally has an external necessity, and its expansion and theorization urgently need to explore the law of innovation practice under typical external situations through the superposition of multiple situational perspectives such as combining static with dynamic perspective, and single with complex perspective.
Innovations under varied contexts
There are significant differences and dynamics in the innovation strategies and paradigms followed by various enterprises under the combination of different situational elements, which is difficult to directly match to the typical models and their applicable conditions in Western theories. 
Therefore, from the perspective of enterprises’ innovational practices, discovering the core subjects and typical characteristics of “Chinese innovation” urgently needs to explore the innovational mode and path of enterprises based on unique local situational elements and their different combinations, so as to reveal the dominant rules of “Chinese innovation.”
Under the situational combination dominated by institutional factors, the innovation of complex product systems, such as the pillars of a great power, mainly benefits from the centralized research and innovation paradigm under the dual guarantee of the administration and marketization. Complex product systems require long-term and huge R&D investment and the efficient operation of large-scale innovation systems that employ the synergy created through the joint efforts of enterprises, universities, and research institutes. Under the dual forces of the government and the market, China has built a huge resource sharing system led by large state-owned enterprises and supported by enterprises, research institutes, and universities along the whole industrial chain, so as to form a typical mode of centralized research. As such, the resulting guarantee of demand and inclined allocation of resources enable core enterprises to continuously build a “self-oriented” open innovation platform, so as to cooperate with many enterprises at home and abroad on innovation and breaking through technical bottlenecks. In terms of technological sources, it is manifested in the secondary innovation mode based on the basic path of “introduction, digestion, and absorption” of late-coming developing countries.  
Under the situational combination dominated by market factors, small and medium-sized manufacturing enterprises in the traditional field realize a rapid rise along GVCs through the innovation paradigm of differential upgrading. Most of China’s manufacturing enterprises start from the low-end market to realize scale expansion, the construction of the industrial chain, and product advantages in the process of continuous capacity accumulation and value upgrading, and then break out through positioning differentiated market segments in the dynamic situation of market stratification, such as consumption upgrading. China’s small and medium-sized manufacturing enterprises can overcome the disadvantages in resources of late-coming developing enterprises under the path of differential upgrading and frugal innovation, and make full use of the advantages of latecomers, so as to realize their own technological upgrading and leapfrogging in innovation.
In the situational combination dominated by technical factors, due to the lack of benchmark enterprises to follow, the growth of large platform enterprises mostly adopts the innovation paradigm of decentralized trial and error. The innovative development path of its growth is mainly manifested in the evolution process of “verticalization, platformization, and ecologicalization.” 
Under the ecosystem of a huge digital economy with Chinese characteristics, a large number of start-ups explore deeply in professional fields, integrate the technological end with the demand end in various scenarios in daily lives, and iteratively build a professional platform. With the accumulation of massive user data resources and the in-depth research and development of core technologies such as artificial intelligence and cloud computing, platform enterprises continue to expand their core business segments to major service fields such as education, medical treatment, and finance, and then realize the all-round construction of a business ecosystem through the innovational mode combining vertical and horizontal extensions.
Chinese innovation theories
“Uniquely Chinese innovation” is a distinctive and diversified combination of innovational practice modes formed by Chinese enterprises through various creative practices under complex and diverse contexts, which is different from the West and other countries. Therefore, thoroughly exploring the characteristics and rules behind “Chinese innovation” will contribute to forming a Chinese School of innovation management theory and elevate “Chinese innovation” to a new level. 
As a product of the integration and symbiosis of practice and theory, “Chinese innovation” not only has its uniqueness, but also has the potential to integrate into and communicate with existing innovation theories. In the current world development pattern, as a rapidly rising developing country, China is positioned between the technologically advanced developed economies and the lagging-behind developing economies whose technological development are still at the initial stage, which makes the innovation of Chinese enterprises unique in the horizontal comparison.
Furthermore, some of the innovation stages experienced by Chinese enterprises have also been experienced by other economies. Therefore, “Chinese innovation” is to explore and refine the unique innovation mode and path combination of Chinese enterprises on the basis of the localizational exploration of existing basic laws of innovation, so as to address the lack of applicability. This will make a beneficial supplement and contribution to classic innovation theories.
Interweaving unique external situations and internal practices, the Chinese School of innovation management theory based on “Chinese innovation” is ready to emerge. To further consolidate the academic contribution to the existing innovation management theory based on “Chinese innovation,” it is urgent for local scholars to go into enterprises to track, explore, and refine the characteristic innovational practices of local enterprises. There is an urgent need to improve the situational embedding depth of theoretical research as well. 
A large number of local enterprises are leading the industry in different fields, making China a fertile land for rich innovation practices based on “Chinese innovation.” The vigorous development of the Chinese School of innovation management theory will also contribute to the academic confidence and theoretical prosperity of China’s philosophy and social sciences.
Su Jingqin (professor) and Gao Xin are from the School of Economics and Management at Dalian University of Technology.
Edited by ZHAO YUAN