Managing the interface between public sector applied research and technological development in the Chinese enterprise sector

China's technological capabilities are emerging rapidly and the country will become a major challenger to established nations in terms of R&D and innovation in the near future. For the moment, however, contradictory signals emerge from the Chinese economy leaving experts pondering about the country's true potential for technological upgrading on a broad scale. The integration of the domestic research system, international technology transfer, and technological development remains limited to a few high-tech companies, while large segments of the domestic private sector have limited access to knowledge and technologies to upgrade their activities. It is the core argument of this paper that technological development in China is not suffering from a lack of innovative capacity or human resources, but from a mismatch of research supply and demand. It is suggested that the expansion of successful domestic knowledge generation beyond a limited number of highly publicised S&T 'mega projects' depends on an improved management system for the interface between public applied research and technological development. The empirical analy-sis brings together data on the Chinese innovation system with evidence from the electronics industry in Guangdong province.