The Limits of State-Led Innovation : Evidence from Chinese Patents

Can China command its way to technological leadership by assigning ambitious targets to local governments? We focus on patents—a standard measure of innovation output. We employ an original dataset of 4.6 million patents filed in 333 Chinese cities from 1990 to 2014, and we also provide a rigorous measure of patent novelty, a proxy for the quality of innovation. Our analysis of the political drivers of Chinese patents production yields two key findings. First, although the 2006 national campaign to promote “indigenous innovation” has spurred a nationwide boom in the number of patents, the novelty of patents has lagged behind. Second, national mandates do not yield uniform results across the country: following the 2006 campaign, cities where leaders faced more intense competition produced more patents, but with a lower share of novelty. Our findings shed concrete light on both the strengths and limitations of command systems in accelerating technological catch-up. China’s innovation drive has successfully produced supersized results, but it is highly inefficient and susceptible to manipulative responses on the ground