Measuring the Effectiveness of the Chinese Innovation System: A Global Value Chain Approach

Abstract

This paper study argues that some disruptive new trends are surfacing with the emergence of new technologies, which makes an efficient and effective R&D and innovation system even more relevant for any country to compete at a global level. Against this backdrop, the study tries to measure the effectiveness of the Chinese innovation system, using the “R&D spending as percentage of GDP” as the input variable and the “contribution of R&D and related business activities to the value-added manufacturing exports” as the output variable. Based on a 59-country sample in the OECD-WTO TiVA database, the regression results show a significant and positive correlation between the two variables. The findings also complement with other existing empirical and qualitative studies in this area. The overall findings show that China has achieved significant efficiency and effectiveness in its innovation system compared with many other countries; in fact, since 2009, the efficiency has accelerated. However, it still lags behind the major global players. This means China still has some room to improve in order to transform its increasing inputs in R&D and technology innovation into commensurate outputs. This situation calls for further improvements in its innovation ecosystem.