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China's Propensity for Innovation in the 21St Century C O R P O R A T I O N STEVEN W. POPPER, MARJORY S. BLUMENTHAL, EUGENIU HAN, SALE LILLY, LYLE J. MORRIS, CAROLINE S. WAGNER, CHRISTOPHER A. EUSEBI, BRIAN CARLSON, ALICE SHIH China's Propensity for Innovation in the 21st Century Identifying Indicators of Future Outcomes For more information on this publication, visit www.rand.org/t/RRA208-1 Library of Congress Cataloging-in-Publication Data is available for this publication. ISBN: 978-1-9774-0596-8 Published by the RAND Corporation, Santa Monica, Calif. © Copyright 2020 RAND Corporation R® is a registered trademark. Cover: Blackboard/Adobe Stock; RomoloTavani/Getty Images Limited Print and Electronic Distribution Rights This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited. Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial use. For information on reprint and linking permissions, please visit www.rand.org/pubs/permissions. The RAND Corporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous. RAND is nonprofit, nonpartisan, and committed to the public interest. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. Support RAND Make a tax-deductible charitable contribution at www.rand.org/giving/contribute www.rand.org Preface How far will China be able to go to ward achieving the pathbreaking innovation it seeks broadly across many sectors? How well might standard criteria for evaluation used in other technology- leading nations apply to a system affirmatively designed to follow a development path “with Chinese characteristics”? Although there are studies of China’s technological achievements, scientific standing, and innovation potential, most often presented as a tally of innovation assets, this report considers the question of China’s propensity for innovation— the system- based dynamics for converting potential into achievement—in the coming de cades. We offer a prospectus for examining China’s system for generating innovation by determining what observable mea sures might be the early indicators or precursors that would allow us to more accurately gauge the trajectory of China’s rise to innovation prominence and how far it may go. We consider impor tant activities, factors, and venues for innovation in China, place them in an integrated framework, propose mea sures for the most impor tant factors affecting the propensity to ward innovation in China, and then from among th ese mea sures select an initial “dashboard” of candidate indicators going forward. This report should be of interest to th ose interested in trade policy, military affairs, national innovation systems, China’s investment policies and development as a major contribu- tor of technological innovation and applications, and the prospects for the relative standing of China and the United States as innovation leaders and competing nations in the future. This research was conducted within the Acquisition and Technology Policy Center of the RAND National Security Research Division, which operates the RAND National Defense Research Institute, a federally funded research and development center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the defense intelligence enterprise. For more information on the Acquisition and Technology Policy Center, see www.rand .org/nsrd/atp or contact the director (contact information is provided on the webpage). Funding Funding for this venture was made pos si ble by the in de pen dent research and development pro- visions of RAND Corporation’s contracts for the operation of its U.S. Department of Defense federally funded research and development centers. iii Contents Preface .................................................................................................iii Figures ................................................................................................ vii Tables ..................................................................................................ix Summary ..............................................................................................xi Acknowl edgments ....................................................................................xix Abbreviations .........................................................................................xxi CHAPTER ONE Capturing Lightning in a Bottle: Innovation and State Power .....................................1 CHAPTER TWO The Nature of Innovation and the Location of Innovative Activity ................................5 What Is Innovation— and Why Should We Care? .....................................................5 National and Regional Innovation Systems .............................................................7 All Innovation Is Local ..................................................................................8 Networks and Innovation ...............................................................................9 Politics and Innovation: Challenge and Response .................................................... 11 A Framework for Evaluating Forces for Innovation ................................................... 13 CHAPTER THREE The Road Toward the Chinese Century ............................................................ 17 Institutions: Formal and Informal .................................................................... 18 Policies .................................................................................................23 Investment in R&D ................................................................................... 27 R&D, Knowledge, and Skill Building ................................................................ 29 Identifying Factors in the Innovation Activity Framework ...........................................30 CHAPTER FOUR Gleaning from Case Studies of Sectoral Innovation ............................................... 37 Artificial Intelligence: Driving to the Future’s Leading Edge ........................................ 38 Phar ma ceu ti cals: Regional Interests and Industry Structure .........................................42 Blockchain Technology: Where Did Every body Go? .................................................44 Factors in the Innovation Activity Framework ........................................................ 49 v vi China’s Propensity for Innovation in the 21st Century CHAPTER FIVE Quantitative and Digital Evidence of Networks in China ........................................ 55 Bibliometric Analy sis of China’s Position in Networks of Science .................................... 56 Patent Applications Citations: Pos si ble Marker for Implicit Innovation Networks ................... 61 Picking Up the Trail: Evidence of Networks in the Gray Lit er a ture. 68 Factors in the Innovation Activity Framework ........................................................ 73 CHAPTER SIX Mea sures and Indicators of China’s Innovation Propensity ...................................... 79 Addressing the Prob lem of Mea sure ment ............................................................. 79 Candidate Indicators for China’s Innovation Propensity ............................................. 85 CHAPTER SEVEN Innovation Propensity: Looking Toward the Future .............................................. 89 APPENDIXES A. Case Study: China and Artificial Intelligence .................................................. 93 B. Case Study: China and Phar ma ceu ti cal Products .............................................109 C. Bibliometric Mea sure ment of Scientific Knowledge Networks ..............................123 Bibliography .........................................................................................129 Figures S.1. Relation Between Innovation Potential and Innovation Propensity ................... xii 1.1. Relation Between Innovation Potential and Innovation Propensity .....................3 5.1. Rate of Citations to China’s Work Compared with World Average, by Discipline ............................................................................ 58 5.2. Rate of Citations to China’s Internationally Coauthored Work Compared with World Average, by Discipline ......................................... 59 5.3. Evolution of Inferred Network from Patent Interconnection as a Function of Patent Number over Time ........................................................... 63 5.4. Cumulative Patent Filings in “Unsupervised Machine Learning,” China and the United States, 1990–2017 ......................................................64 5.5a. Cumulative Total References to Most Frequent Technical Areas Cited in U.S.- Origin “Unsupervised Machine Learning” Patents by Year, 2006–2018 ..................................................................... 65 5.5b. Cumulative Total References to Most Frequent Technical Areas Cited in China- Origin “Unsupervised Machine Learning” Patents by Year, 2006–2018 .....................................................................66 5.6. Cumulative Dispersion of Technical Classes
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