Innovation divide in the world economy: China’s convergence towards the Triad
The objective of this article is to assess the dynamics of the innovation divide between China and the Triad, as well as to determine the factors that influence its evolution. The Triad consists of three economies traditionally dominating the world economy: the United States, the European Union, and Japan. The methodology involves the decomposition of the innovativeness of the economy into innovation capability, innovation position, and the relationship between them, which indicates the efficiency of the innovation system. The analysis of dynamic indexes and σ-convergence in all these components confirms that the global economy has been gradually losing clear polarization into innovation leaders, found among developed countries and innovation followers, which have traditionally been associated with developing nations. In addition to demonstrating fast improvement in the Summary Innovation Index of China towards the Triad, the paper has a clear contribution by showcasing China’s improvement through the decomposed factors of the innovativeness of the economy. In comparison with the Triad, China has a proportionally higher innovation position and efficiency of the innovation system and a lower level of innovation capacity. This demonstrates its dependence on external sources of innovation and international technology transfer, e.g. through foreign direct investments.
First published online 09 June 2022
This work is licensed under a Creative Commons Attribution 4.0 International License.
Ahlstrom, D., Yang, X., Wang, L., & Wu, C. (2018). A global perspective of entrepreneurship and innovation in China. Multinational Business Review, 26(4), 302–318. https://doi.org/10.1108/MBR-08-2018-0058
Anghelache, C., & Manole, A. (2012). Dynamic/chronological (time) series – theoretical presentation, structure, relationships between indices. Romanian Statistical Review, (10).
Bai, J. (2013). On Regional innovation efficiency: Evidence from panel data of China’s different provinces. Regional Studies, 47(5), 773–788. https://doi.org/10.1080/00343404.2011.591784
Basel, S., Rao, R. P., & Gopakumar, K. U. (2021). Analysis of club convergence for economies: Identification and testing using development indices. Asia-Pacific Journal of Regional Science, 5, 885–908. https://doi.org/10.1007/s41685-021-00205-8
Cerulli, G., Gabriele, R., & Potì, B. (2016). The role of firm R&D effort and collaboration as mediating drivers of innovation policy effectiveness. Industry and Innovation, 23(5), 426–447. https://doi.org/10.1080/13662716.2016.1169159
Chen, A. W., Chen, J., & Dondeti, V. R. (2020). The US-China trade war: dominance of trade or technology? Applied Economics Letters, 27(11), 904–909. https://doi.org/10.1080/13504851.2019.1646860
Chen, K., & Guan, J. (2012). Measuring the efficiency of China’s regional innovation systems: Application of Network Data Envelopment Analysis (DEA). Regional Studies, 46(3), 355–377. https://doi.org/10.1080/00343404.2010.497479
Dijk, J. V. (2020). The digital divide. Polity.
Drori, G. S. (2010). Globalization and technology divides: Bifurcation of policy between the “digital divide” and the “innovation divide”. Sociological Inquiry, 80(1), 63–91. https://doi.org/10.1111/j.1475-682X.2009.00316.x
Dutta, S., Lanvin, B., & Wunsch-Vincent, S. (2018). Global innovation index 2018: Energizing the world with innovation. WIPO.
Dutta, S., Lanvin, B., Wunsch-Vincent, S., & León, L. R. (2021). Global innovation index 2021: Tracking innovation through the COVID-19 crisis (14 ed.). WIPO. https://doi.org/10.34667/tind.44315
Ebenstein, A., Harrison, A., & McMillan, M. (2015). Why are American workers getting poorer? China, trade and offshoring. National Bureau of Economic Research. https://doi.org/10.3386/w21027
Foray, D., & Lundvall, B.-Ä. (1998). The knowledge-based economy: From the economics of knowledge to the learning economy. In The economic impact of knowledge (pp. 115–121). Butterworth-Heinemann. https://doi.org/10.1016/B978-0-7506-7009-8.50011-2
Fry, C. V., Cai, X., Zhang, Y., & Wagner, C. S. (2020). Consolidation in a crisis: Patterns of international collaboration in early COVID-19 research. PloS one, 15(7), e0236307. https://doi.org/10.1371/journal.pone.0236307
Furman, J. L., & Hayes, R. (2004). Catching up or standing still? Research Policy, 33(9), 1329–1354. https://doi.org/10.1016/j.respol.2004.09.006
Furman, J. L., Porter, M. E., & Stern, S. (2002). The determinants of national innovative capacity. Research Policy, 31(6), 899–933. https://doi.org/10.1016/S0048-7333(01)00152-4
Glawe, L., & Wagner, H. (2020). China in the middle-income trap? China Economic Review, 60, 101264. https://doi.org/10.1016/j.chieco.2019.01.003
Gros, D. (2019). This is not a trade war, it is a struggle for technological and geo-strategic dominance.
Howell, A. (2020). Agglomeration, absorptive capacity and knowledge governance: implications for public–private firm innovation in China. Regional Studies, 54(8), 1069–1083. https://doi.org/10.1080/00343404.2019.1659505
Ji, Q., & Zhang, D. (2019). How much does financial development contribute to renewable energy growth and upgrading of energy structure in China? Energy Policy, 128, 114–124. https://doi.org/10.1016/j.enpol.2018.12.047
Kang, N., & Paus, E. (2020). The Political economy of the middle income Trap: The challenges of advancing innovation capabilities in Latin America, Asia and beyond. The Journal of Development Studies, 56(4), 651–656. https://doi.org/10.1080/00220388.2019.1595601
Kaplinsky, R., & Kraemer-Mbula, E. (2022). Innovation and uneven development: The challenge for low- and middle-income economies. Research Policy, 51(2), 104394. https://doi.org/10.1016/j.respol.2021.104394
Kaufmann, L. (2021). Prototype Nation: China and the Contested Promise of Innovation Silvia M. Lindtner Princeton, NJ, and Oxford: Princeton University Press, 2020 288 pp. £20.00; $24.95 ISBN 978-0-691-20767-4. The China Quarterly, 246, 602–603. https://doi.org/10.1017/S0305741021000291
Kowalski, A. M. (2019). The perspectives on interregional cluster cooperation under BRI Frame. J. Shi, & G. Heiduk (Eds.), Opportunities and challenges. Sustainability of China–EU relations in a changing world (pp. 189–209).
Kowalski, A. M. (2020). Dynamics and factors of innovation gap between the European Union and China. Journal of the Knowledge Economy, 12, 1966–1981. https://doi.org/10.1007/s13132-020-00699-1
Kowalski, A. M. (2022). Regional approach to innovation and the role of clusters. In A. M. Kowalski (Ed.), The dynamics of the innovation divide between China and Europe (pp. 21–47). Routledge. https://doi.org/10.4324/9781003199052-3
Krugman, P. (1998). What’s new about the new economic geography? Oxford Review of Economic Policy, 14(2), 7–17. https://doi.org/10.1093/oxrep/14.2.7
Lei, J., Zhang, Q., & Qi, Y. (2020). Innovation-led development: The logic of China’s economic development. Journal of Industrial Integration and Management, 5(1), 1–11. https://doi.org/10.1142/S2424862220500013
Li, K., Qu, J., Wei, P., Ai, H., & Jia, P. (2020). Modelling technological bias and productivity growth: A case study of China’s three urban agglomerations. Technological and Economic Development of Economy, 26(1), 135–164. https://doi.org/10.3846/tede.2020.11329
Lin, Y., Qin, Y., & Xie, Z. (2021). Does foreign technology transfer spur domestic innovation? Evidence from the high-speed rail sector in China. Journal of Comparative Economics, 49(1), 212–229. https://doi.org/10.1016/j.jce.2020.08.004
Lindtner, S. M. (2020). Prototype nation: China and the contested promise of innovation. Princeton University Press. https://doi.org/10.23943/princeton/9780691207674.001.0001
Nambisan, S., Wright, M., & Feldman, M. (2019). The digital transformation of innovation and entrepreneurship: Progress, challenges and key themes. Research Policy, 48(8), 103773. https://doi.org/10.1016/j.respol.2019.03.018
Nasierowski, W. (2019). Assessing technical efficiency of innovations in Canada: The global snapshot. International Journal of Innovation Management, 23(03), 1950025. https://doi.org/10.1142/S1363919619500257
O’Connor, J., & Gu, X. (2014). Creative industry clusters in Shanghai: A success story? International Journal of Cultural Policy, 20(1), 1–20. https://doi.org/10.1080/10286632.2012.740025
OECD. (2010). Measuring innovation: A new perspective.
OECD. (2021). Science, technology and innovation Outlook 2021: Times of crisis and opportunity. OECD Publishing Paris.
Priede, J., & Pereira, E. T. (2013). Innovation as a key factor in the international competitiveness of the European Union. European Integration Studies, (7), 212–221. https://doi.org/10.5755/j01.eis.0.7.4228
Prud’homme, D., & von Zedtwitz, M. (2019). Managing “forced” technology transfer in emerging markets: The case of China. Journal of International Management, 25(3), 100670. https://doi.org/10.1016/j.intman.2019.04.003
Rohlfer, S., & Zhang, Y. (2016). Culture studies in international business: Paradigmatic shifts. European Business Review, 28(1), 39–62. https://doi.org/10.1108/EBR-07-2015-0070
Romer, P. M. (1990). Endogenous technological-change. Journal of Political Economy, 98(5), S71-S102. https://doi.org/10.1086/261725
Roszko-Wójtowicz, E., & Białek, J. (2019). Measurement of the average innovativeness change over time in the EU member states. Journal of Business Economics and Management, 20(2), 268–293. https://doi.org/10.3846/jbem.2019.8337
Rowley, C., & Oh, I. (2020). Trends in Chinese management and business: Change, Confucianism, leadership, knowledge & innovation. Taylor & Francis. https://doi.org/10.1080/13602381.2019.1698707
Schmid, J., & Wang, F. L. (2017). Beyond national innovation systems: Incentives and China’s innovation performance. Journal of Contemporary China, 26(104), 280–296. https://doi.org/10.1080/10670564.2016.1223108
Smith, K. (2005). Measuring innovation. In J. Fagerberg, D. C. Mowery, R. R. Nelson (Eds.), The Oxford handbook of innovation (pp. 148–177). Oxford University Press.
Song, M., Zheng, W., & Wang, S. (2017). Measuring green technology progress in large-scale thermoelectric enterprises based on Malmquist–Luenberger life cycle assessment. Resources, Conservation and Recycling, 122, 261–269. https://doi.org/10.1016/j.resconrec.2017.03.001
Steinbock, D. (2018). US-China trade war and its global impacts. China Quarterly of International Strategic Studies, 4(4), 515–542. https://doi.org/10.1142/S2377740018500318
Strielkowski, W., & Höschle, F. (2016). Evidence for economic convergence in the EU: The analysis of past EU enlargements. Technological and Economic Development of Economy, 22(4), 617–630. https://doi.org/10.3846/20294913.2014.890138
Tian, M., Deng, P., Zhang, Y., & Salmador, M. P. (2018). How does culture influence innovation? A systematic literature review. Management Decision, 56(5), 1088–1107. https://doi.org/10.1108/MD-05-2017-0462
Tyfield, D. (2018). Innovating innovation-Disruptive innovation in China and the low-carbon transition of capitalism. Energy Research & Social Science, 37, 266–274. https://doi.org/10.1016/j.erss.2017.10.024
Veugelers, R. (2017). The challenge of China’s rise as a science and technology powerhouse (Bruegel Policy Contribution No. 2017/19).
Wang, K.-J., Lestari, Y. D., & Yang, T.-T. (2015). Location determinants of market expansion in China’s second-tier cities: a case study of the biotechnology industry. Journal of Business & Industrial Marketing, 30(2), 139–152. https://doi.org/10.1108/JBIM-03-2012-0048
Wang, S., Fan, J., Zhao, D. T., & Wang, S. Y. (2016). Regional innovation environment and innovation efficiency: the Chinese case. Technology Analysis & Strategic Management, 28(4), 396–410. https://doi.org/10.1080/09537325.2015.1095291
Wang, H., & Liu, H. (2019). Foreign direct investment, environmental regulation, and environmental pollution: an empirical study based on threshold effects for different Chinese regions. Environmental Science and Pollution Research, 26(6), 5394–5409. https://doi.org/10.1007/s11356-018-3969-8
Wang, K., Hong, J., Marinova, D., & Zhu, L. (2009). Evolution and governance of the biotechnology and pharmaceutical industry of China. Mathematics and Computers in Simulation, 79(9), 2947–2956. https://doi.org/10.1016/j.matcom.2008.09.001
Wang, Y. H., Wu, D. D., & Li, H. (2021). Efficiency measurement and productivity progress of regional green technology innovation in China: a comprehensive analytical framework. Technology Analysis & Strategic Management. https://doi.org/10.1080/09537325.2021.1963427
Wen, J., Yang, D., Feng, G. F., Dong, M. Y., & Chang, C. P. (2018). Venture capital and innovation in China: The non-linear evidence. Structural Change and Economic Dynamics, 46, 148–162. https://doi.org/10.1016/j.strueco.2018.05.004
Yang, T., Xing, C., & Li, X. Y. (2021). Evaluation and analysis of new-energy vehicle industry policies in the context of technical innovation in China. Journal of Cleaner Production, 281, 125126. https://doi.org/10.1016/j.jclepro.2020.125126
Yusof, S. M., & Othman, R. (2016). Leadership for creativity and innovation: Is Japan unique. Journal of Advanced Management Science, 4(2). https://doi.org/10.12720/joams.4.2.176-180
Zeng, J. Y., Liu, Y., Wang, R. Y., & Zhan, P. Y. (2019). Absorptive Capacity and Regional Innovation in China: An Analysis of Patent Applications, 2000–2015. Applied Spatial Analysis and Policy, 12(4), 1031–1049. https://doi.org/10.1007/s12061-019-09300-y
Zhang, D., Rong, Z., & Ji, Q. (2019). Green innovation and firm performance: Evidence from listed companies in China. Resources, Conservation and Recycling, 144, 48–55. https://doi.org/10.1016/j.resconrec.2019.01.023
Zhang, Y. L. (2021). The regional disparity of influencing factors of technological innovation in China: Evidence from high-tech industry. Technological and Economic Development of Economy, 27(4), 811–832. https://doi.org/10.3846/tede.2021.14828
Zhao, S. X. B., Wong, D. W. H., Wong, D. W. S., & Jiang, Y. P. (2020). Ever‐transient FDI and ever‐polarizing regional development: Revisiting conventional theories of regional development in the context of China, Southeast and South Asia. Growth and Change, 51(1), 338–361. https://doi.org/10.1111/grow.12358