Demystifying China's Innovation Machine
China’s extraordinary economic development is explained in large part by the way it innovates. This book explains how it innovates, which has important implications not only for China but also for the rest of the world. Contrary to widely held views, China’s innovation machine is not created and controlled by an all-powerful government. Instead, it is a complex, interdependent system composed of hundreds of millions of elements, involving bottom-up innovation driven by innovators and entrepreneurs and highly pragmatic and adaptive top-down policy. Using case studies of leading firms and industries, statistics, and policy analysis, the book argues that China’s innovation machine is similar to a natural ecosystem. Innovations in technology, organization, and business model resemble genetic mutations which are random, self-serving and isolated initially, but the best fitting are selected by the market and their impacts are amplified by the innovation machine. This machine draws on China’s massive number of manufacturers, supply chains, innovation clusters, and digitally literate population, connected through supersized digital platforms. China’s innovation suffers from a lack of basic research and reliance upon certain critical technologies from overseas; its scale (size) and scope (diversity) possess attributes that make it self-correcting and stronger in the face of challenges. China’s innovation machine is most effective in a policy environment where the market prevails; policy intervention plays a significant role when market mechanisms are premature or fail. The book concludes that the future success of China’s innovation will depend on continuing policy pragmatism, mass entrepreneurship and innovation, and the development of the ‘new infrastructures’.