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© Institute for Fiscal Studies How long before China joins the US at the technological frontier? Rachel Griffith Helen Miller

Dec 22, 2015

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  • Slide 1
  • Institute for Fiscal Studies How long before China joins the US at the technological frontier? Rachel Griffith Helen Miller
  • Slide 2
  • Motivation Increasing evidence of the rise of innovative activities in China Academic literature: China far from technology frontier Public perception: China has increasingly important role at the technological frontier Institute for Fiscal Studies
  • Slide 3
  • Motivation Increasing evidence of the rise of innovative activities in China Striking increase in R&D spending Also in other inputs, skilled workers Increase in outputs including patenting Academic literature: China far from technology frontier Public perception: China has increasingly important role at the technological frontier Institute for Fiscal Studies
  • Slide 4
  • Business expenditure on R&D as a percentage of GDP Institute for Fiscal Studies
  • Slide 5
  • Motivation Increasing evidence of the rise of innovative activities in China Striking increase in R&D spending Also in other inputs, skilled workers Increase in outputs including patenting Academic literature: China far from technology frontier Public perception: China has increasingly important role at the technological frontier Institute for Fiscal Studies
  • Slide 6
  • Motivation Increasing evidence of the rise of innovative activities in China Academic literature: China far from technology frontier Puga and Trefler (2010); emphasise largely incremental innovation Thursby and Thursby (2006) and von Zedtwitz and Gassmann (2002); survey evidence that research part of R&D still conducted outside China Branstetter and Foley (2007); conclude that China is far from becoming a technological superpower. Exception: Zhou and Leydesdorff (2006), increase scientific papers Public perception: China has increasingly important role at the technological frontier Institute for Fiscal Studies
  • Slide 7
  • Trends in Patenting; China approaching the US World Intellectual Property Office (WIPO) figures Chinese applicants rank fifth for number of PCT patent applications (behind US, Japan, Germany and Korea) Huawei Technologies, was the second largest filer of PCT applications in 2009 (in 2008 it was the largest) How long would it take before the number of applications filed by a Chinese applicant was equally to the number filed by a US applicant? Alternative scenarios : Growth matches 5 years to 2009 => 2015 35% growth Chinese applicants + 0% growth US applicants Less optimistic => 2034 10% growth Chinese applicants + 2.5% growth US applicants Data EPO, USPTO and SIPO corroborate this picture Institute for Fiscal Studies
  • Slide 10
  • Patents filed by Chinese applicants and Chinese inventors Institute for Fiscal Studies
  • Slide 11
  • Chinese at the leading edge of technology? Literature has placed emphasis on incremental activity and small scale Fiscal incentives likely to encourage low quality patenting in China Reductions in tax, increased probability of contracts, bonuses related to number of patents EPO patent applications (PATSTAT) Expect higher average quality that SIPO Remove home biases US and Chinese firms Use information on the citations to non-patent literature Consider patent applications that cite a paper in the scientific literature (non-patent literature) to represent ideas that are closer to the science base (near science) Institute for Fiscal Studies
  • Slide 12
  • Near science applications; which baseline? Much of increase in EPO patenting in recent decades has been due to low quality patents share of EPO applications that cite scientific literature has declined from 35% in 1995 to 12% in 2005. Similar pattern for patent applications which have at least one US inventor Very different for those applications with at least one Chinese inventor associated with a share of near science applications which is both higher and has declined less rapidly. In 2005 a larger proportion of applications with Chinese applicants are near science (24%) than is the case for all EPO applications (12%) or those with US applicants (8%). Institute for Fiscal Studies
  • Slide 13
  • Share of EPO patent applications that are near science Institute for Fiscal Studies
  • Slide 14
  • Share of EPO patent applications that are near science Institute for Fiscal Studies
  • Slide 15
  • Growth in number near science EPO applications Institute for Fiscal Studies
  • Slide 16
  • Research teams Increasing prevalence of team-based research. Wuchty et al (2007) - trend towards multiple inventors Greater emphasis on team work as innovation gets harder to produce (Jones (2009)) and as collaboration becomes cheaper (Agrawal and Goldfarb (2008)) Suggestions in the literature that inventors in emerging economies are more likely to work in international teams teams are a mechanism to control for inferior expertise (Branstetter and Foley (2007)) and/or may facilitate the movement of knowledge within multinational companies. (Singh (2005)) More collaboration when involved in creating near science technologies?
  • Slide 17
  • Institute for Fiscal Studies Proportion of patents, by research team Near scienceNot near science Collaborative: inventors in more than one country
  • Slide 18
  • Institute for Fiscal Studies Proportion of patents, by research team Near scienceNot near science Collaborative: inventors in more than one country
  • Slide 19
  • Institute for Fiscal Studies Proportion of patents, by research team Near scienceNot near science Collaborative home: inventors in more than one country, with at least one in the same country as the applicant.
  • Slide 20
  • A tale of (at least) two perspectives Evidence that Chinese inventors/firms involved in research at technology frontier For China: Innovation important driver of growth, benefits from increase in innovation and near science research (inc FDI) For the West: Not zero sum game; many benefits Many concerns; China as source of competition in both product market and labour market (related to investment by western firms) Institute for Fiscal Studies
  • Slide 21
  • A tale of (at least) two perspectives Evidence that Chinese inventors/firms involved in research at technology frontier For China: Innovation important driver of growth, benefits from increase in innovation and near science research (inc FDI) For the West: Not zero sum game; many benefits New markets for goods and services Access to skilled workers or technologies, potentially at lower cost. Gains from trade, both directly through improved performance (technical change) and indirectly if knowledge is transmitted back to the home country. Many concerns; China as source of competition in both product market and labour market (related to investment by western firms) Institute for Fiscal Studies
  • Slide 22
  • A tale of (at least) two perspectives Evidence that Chinese inventors/firms involved in research at technology frontier For China: Innovation important driver of growth, benefits from increase in innovation and near science research (inc FDI) For the West: Not zero sum game; many benefits Many concerns; China as source of competition in both product market and labour market (related to investment by western firms) Lose jobs Fall behind technologically Lose geographically localised spillovers Institute for Fiscal Studies
  • Slide 23
  • Western European multinationals innovating in China (and other emerging economies) Part of increase in Chinese innovation driven by investment of foreign multinationals Multinational firms carry out an increasing share of their innovative activities in emerging countries 2010 report by Ernst and Young: China, Eastern Europe and India are reportedly perceived to be the most attractive regions for FDI over the next three years. World 2025 report India and China set to be main destinations for business R&D by 2025 Look specifically at this; use patents data (PATSTAT) matched to accounts data (Amadeus) - to what do western multinationals locate in emerging economies and how do they organise their activities there? Institute for Fiscal Studies
  • Slide 24
  • Number of EPO patent applications with at least one Chinese inventor, by applicant country Institute for Fiscal Studies
  • Slide 25
  • Inventors in emerging economies Firms still keep most activity at home or in other developed economies Differences across firm country French and Dutch firms are associated with proportionally more Chinese inventors Heterogeneity across firms Many patenting firms file no patents listing Chinese inventors, others conduct a significant share activity there Proportionately more Chinese inventors working on Communications and Computing technologies (use Derwent Innovation Index to define technologies)
  • Slide 26
  • Institute for Fiscal Studies Research teams More likely to be a collaborative research team when inventors in emerging economies
  • Slide 27
  • Institute for Fiscal Studies Research teams More likely to be a collaborative research team when inventors in emerging economies Not a clear relationship with near science research Near scienceNot near science
  • Slide 28
  • Institute for Fiscal Studies Research teams More likely to be a collaborative research team when invento
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