State Capacity in China's Innovation Subsidy Policy: A Perspective on Government Knowledge

This article studies state capacity in innovation policy from the perspective of government knowledge. In the market-oriented reform, the Chinese state has changed its way to coordinate technological development from the planning approach such as administrative orders and plan targets to the market approach such as innovation subsidy policies. Through case studies and regression analysis, this research finds that China's state capacity in its innovation subsidy policies is highly limited in all because the government knowledge is too thin to achieve the state's goals. However, its policy performance is different between the two categories of innovation subsidy policies. Policies that use qualification certification as the main instrument rely on grassroots governments as the main executors, and they do not have industry-specific human resources and have failed to make use of potential connecting network with the industry. Policies that use project contracting as the main instrument do fare better. The central government, as the main policy maker and performer, has industry-specific personnel and has made better use of the penetration network of local governments. Consequently, state actors are more effective in identifying potential innovators and monitoring the process, and enterprises are more likely to comply with institutions in "project-based" policies, which lead to better policy performance than "qualification-based" policies.