Government policy change and evolution of regional innovation systems in China: evidence from strategic emerging industries in Shenzhen

The mid-2000s witnessed a paradigm shift of technological innovation in China, characterized by a policy change from expectation of technological spillover from transnational corporations to an emphasis on indigenous innovation and domestic firms. Notably, seven strategic emerging industries (SEIs) have been designated by the central government to foster technological upgrading in the wake of the 2008 global financial crisis. While increasing attention has been paid to these policy changes, the practice of developing SEIs and subsequent impacts on innovation dynamisms remain understudied. Drawing upon an institutional evolution perspective on the regional innovation systems (RIS) approach, I examine how foreign-invested and domestic firms have adjusted their innovation strategies in the changing institutional environment, through examining the light-emitting diode (LED) industry, one of the state-designated SEIs in Shenzhen. This study was conducted primarily from on-site field investigation, firm-level surveys, and in-depth interviews during the period of 2008 and early 2013. It sheds light on the adaptation of the local state, reflected by the Shenzhen municipal government's recent abolishment of the LED industry development plan after four years of implementation. I urge more studies to examine other SEIs designated by various governments in different cities and regions in China to better understand policy change and effects on national innovation systems and RISs in the contemporary global economy.