Beyond National Innovation Systems: Incentives and China's Innovation Performance

This article describes the nature of innovation performance in the People's Republic of China (PRC) in the context of its changing national innovation system (NIS). More specifically, it proposes to explain China's lack of frontier innovation as reflected by the low quality of Chinese patents and scientific publications. Moving beyond the NISthe prevailing framework for understanding national innovation ratesthis article offers additional determinants to explain the unique profile of Chinese innovation. Through interviews with stakeholders from each of the three major NIS actor types and analysis of the incentive environment, two determinants of China's high rate of nominal patenting are identified. First, the incentive structure facing inventors, scientists and entrepreneurs is found to be ill-suited to promoting innovation. Second, the ubiquitous officials-rank standard (guan benwei) is identified as a mediating variable that amplifies the effect of suboptimal incentives in promoting nominal (as opposed to real) innovation. In essence, the authors find that ill-structured innovation incentives and the officials-rank standard work in tandem to create a high proportion of nominal innovations in the PRC.