The Limits of State-Led Innovation: Evidence from Chinese Patents

Yuen Yuen Ang is an associate professor of political science and a China scholar at the University of Michigan, with a PhD from Stanford University. Her work centers on two interconnected themes: disruption and adaptation—with a focus on China’s rise as one of the greatest disruptions of our time. Dr. Ang discusses her research regarding Beijing’s drive for state-led innovation.

There exists a common narrative of a “technological Cold War” between China and the U.S., as technology lies at the heart of Sino-American competition. Some, such as Senator Marco Rubio, believe that China has an authoritarian advantage in technological innovation as they can employ a strategy of “whole of state industrial planning”. Ang’s research evaluates whether China can really catch up through national mobilization and setting ambitious targets. Her empirical strategy examines both quantity and quality of patents to examine the efficacy of the national campaign to promote indigenous innovation in China.

In 2006, Beijing launched its drive for indigenous innovation, setting explicit targets for the number of patents to be filed each year with the goal of replacing foreign technology with locally-made technology. Innovation was added to the cadre evaluation system, in addition to other metrics such as GDP. In 2011, China surpassed Japan as the world’s top patent-filer.

Ang’s data set includes 4.6 million domestic patents filed in 333 Chinese cities from 1990-2014, marking patents as “novel” if they draw from two or more technology domains not previously combined in China. Only 7.5% of invention patents and 5% of utility model patents qualified as novel. Aggregating the data shows that incremental (non-novel) patents-- many of which could be duplicate, junk patents-- have grown at a much faster rate than novel patents.

Consistent with her hypotheses, Ang’s research found that more intense local political competition after 2006 correlates with a higher quantity of patents, but a lower share of novel patents. Local competition and a pressure from Beijing to increase patent production has led local governments to use subsidies and grants to incentivize businesses and individuals to “game” patents. Some file ludicrous patents for products such as “chicken soup eyedrops”, and others file multiple patents for the same thing, like a physicist who filed one patent for every wave band of a radar instrument.

Ang offers several takeaways from her research. First, China’s state-led innovation drive was certainly big, but highly inefficient. In fact, the share of novel patents filed in China dropped from 10.2% in 2006 to a mere 3.3% in 2014, illustrating the damage of perverse incentives to cheat the system. Second, she discusses the implications of her research on U.S. policy. Some officials, like Senator Rubio, have argued that the U.S. needs to match China’s innovation drive with a “twenty-first century pro-American industrial policy”. Ang warns that Washington needs to focus on matching China in productivity rather than in sheer scale of patents, and direct and support innovation rather than dictate it. She closes by adding that these recommendations apply to Beijing as well.





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