World Development Vol. 35, No. 6, pp. 1056–1074, 2007 Ó 2007 Elsevier Ltd. All rights reserved 0305-750X/$ - see front matter www.elsevier.com/locate/worlddev doi:10.1016/j.worlddev.2006.05.013 Universities/Research Institutes and Regional Innovation Systems: The Cases of Beijing and ShenzhenI
KUN CHEN University of California, Berkeley, USA
and
MARTIN KENNEY * University of California, Davis, USA Berkeley Roundtable on the International Economy, USA
Summary. — This paper explores the role of universities and research institutes (URIs) in the devel- opment of the Chinese economy through a comparison of the development of the Beijing and Shenzhen technology clusters. The two locations, while embedded in the same national innovation system, have exhibited completely different evolutionary trajectories. In the case of Beijing, the URIs have played an extremely important role in the development of largest high technology clus- ter in China. In contrast, in Shenzhen, which is now the third most important cluster in China, has in the last twenty years policy makers have consciously worked to establish and attract institutions of higher education. We suggest that the Chinese experience, though not without problems, pro- vides an interesting model for other nations with strong URIs. Ó 2007 Elsevier Ltd. All rights reserved.
Key words — China, Beijing, Shenzhen, universities, clusters, research and development
1. INTRODUCTION firms (Kenney, 1986; Shane, 2004; Zucker, Dar- by, & Brewer, 1998). 2 It is now widely accepted that universities The discussions of high-technology regions and public research institutes (URIs) played a have focused on developed countries. 3 In the substantial role in the development of many cases of Taiwan (Saxenian, 2004) and India high-technology regions in the United States (Arora, Gambardella, & Torrisi, 2004), univer- and abroad (Bresnahan & Gambardella, sity research does not appear to have been a 2004). In the United States, the two most suc- significant contributor to regional growth thus cessful clusters of high-technology firms in both far; although in Taiwan the Information Tech- the information technologies and biotechnolo- nology Research Institute played an important gies are the Boston and San Francisco Bay role in the development of the Hsinchu areas, which are also the locations of the top Technology Park (Noble, 2000). In all of these four universities (Kenney & von Burg, countries, well-trained university graduates 1999). 1 The presence of global-class universi- ties in these two regions is partially responsible for their success. Their students often remained I‘‘Universities as Drivers of the Urban Economies in in the area and eventually became entrepre- Asia’’ sponsored by the World Bank and Social neurs, and the research conducted at their uni- Research Council (May 24–25, 2005). versities, at times, became the seed for new * Final revision accepted: May 18, 2006. 1056 UNIVERSITIES/RESEARCH INSTITUTES AND REGIONAL INNOVATION SYSTEMS 1057 were critical inputs. In the last decade, three IT ship of a commercial firm would invalidate its industry-based clusters, Beijing, Shanghai, and tax-exempt status—a line that private and pub- Shenzhen, have emerged in China. 4 This paper lic research universities have been unwilling to examines the role of URIs in the development cross. Thus, national laws and decisions pro- of IT clusters in Beijing and Shenzhen. We will vide the parameters for the actions of organiza- argue that in the case of Beijing, the URIs were tions such as universities. critical contributors, while in Shenzhen they The literature treats URIs as an endow- made no contribution. ment. Regions have excellent URIs or they Universities have long been considered do not. Beijing and Shenzhen are interesting important institutions in national innovation because Beijing is the Chinese city most en- systems (NIS) (Lundvall, 1992; Nelson, 1993). dowed with top-quality universities and re- Over the decades the university has been dele- search institutes (URIs), while Shenzhen only gated a variety of roles in addition to education 20 years ago had no URIs, yet it has experi- and research; these include public service, enced significant high-technology growth. As improving national competitiveness, helping an illustration, after Beijing and Shanghai, to ameliorate social injustice (e.g., affirmative Shenzhen firms are the recipients of the great- action), and regional economic development. est amount of technology-oriented venture The NIS perspective highlights the fact that capital (Zero-2-IPO, 2005). In contrast, Bei- countries organize innovation differently. Not jing had little in the way of industry, while unexpectedly, the role of universities in each Shenzhen was the earliest growth pole in the NIS differs significantly. The NIS perspective new export-oriented Chinese economy. Given has been criticized by scholars who have as- their different endowments, the development serted that innovation processes in industries trajectory of the two regions with respect to and regions differ even within the countries. 5 utilizing URIs diverged significantly. 7 As po- For example, Saxenian (1994) argued that the lar opposites, these two cities can provide in- institutions and entrepreneurship of Silicon sight into the deeply held belief by local Valley and Boston differed appreciably, some- officials throughout China that universities thing she attributed to cultural characteristics, are the fount of high-technology development rather than path dependent historical outcomes that will lead to prosperity. and different industry foci. 6 When discussing Chinese growth and statis- Though recognizing the importance of the tics, it is important to note that governmental NIS for understanding how innovation oc- statistics are often deceptive because officials curred in countries, geographers argued that are under pressure to meet targets and plans, innovation systems had a strong regional char- therefore there is a tendency to minimize the acter (Cooke, 1992, 2001; Storper, 1997). The negative and maximize the positive. The Chi- regional argument fits with the findings of econ- nese definition of ‘‘high technology’’ is very omists such as Jaffe, Trajtenberg, and Hender- broad and only some of the activities would son (1993) and Feldman (1993) that inventors conform to the commonly accepted definitions cite other patents originating in the same loca- of high technology in developed countries. In tion more frequently than patents outside the China, personal computer assembly is consid- location even when controlling for the existing ered ‘‘high technology’’, while few in the Uni- geography of related research activity. This ted States would define it as such. Because suggests that it might be profitable to consider firms considered to be in high technology re- whether there were regional innovation systems ceive tax and the other benefits, there are ulte- (RIS) that consisted of private and public rior motives for declaring oneself to be a high sector actors interacting to create local arrange- technology firm. In the case of Chinese tech- ments and relationships encouraging innova- nology parks, Cao (2004) in a withering anal- tion (Doloreux, 2003; Edquist, 2004; Wolfe, ysis finds that the government, though 2003). emphasizing innovation, has in practice been The linkages between the NIS and various more interested in simple quantitative statistics RISs are often omitted or assumed by those such as rates of growth, numbers of firms, and studying regions (Niosi, 2005). The NIS is value of exports. In the case of Chinese patent important because it sets the basic parameters statistics, it is generally accepted that many of for what is possible. For example, in China uni- them are of dubious merit, and also an versities can own profit-making firms, while in increasing number of them are filed by foreign the United States a university’s direct owner- firms seeking protection in China, and thus are 1058 WORLD DEVELOPMENT not Chinese in origin. Where possible we use section begins with a discussion of the historical data from other sources, however often Chi- background within which the Chinese URIs nese government data is all that is available. evolved. Though the number and quality of what is counted is suspect, it is likely that the trends do represent an underlying reality. 3. THE CHINESE CONTEXT
Until approximately the 15th century, China 2. LITERATURE REVIEW was the global technology leader. With the rise of Western Europe, China increasingly lagged The literature broadly defines the NIS as a behind Europe and later the European settler network of institutions, policies, and agents states, particularly the United States, in the supporting and sustaining scientific and techni- development of new technology and economic cal advance (Crow & Bozeman, 1998; Furman, growth. The reasons for China’s decline are Porter, & Stern, 2002; Nelson & Rosenberg, not certain, however by the 19th Century China 1993; Porter & Stern, 2001). In knowledge no longer played a significant role in the global economies, URIs are vital actors in the crea- economy; nor was it a contributor of new tion, acquisition, dissemination, and utilization technical or scientific knowledge (Adas, 1989; of knowledge (Nelson & Rosenberg, 1993). Mokyr, 1992; Needham, 1954). Three core actors to an NIS are URIs, industry, In 1895, China established its first Western- and government (Etzkowitz, 1999; Mowery & style university in Tianjin. This was followed Rosenberg, 1993). in quick succession by Xi’an Jiaotong and URI–industry relations are myriad and can Shanghai Jiaotong Universities in 1896. Soon include: labor market related linkages, linkages every major Chinese city established a univer- for creation, acquisition, and dissemination of sity, for example Zhejiang University (1897), knowledge, and linkages to create new enter- Peking University (1898), and Nanjing Univer- prises. URIs are the major educational and sity (1902). Tsinghua University, which became training institutions where students and profes- China’s premier technical university, was estab- sionals educated and trained gain knowledge lished in 1911. By 1920, though most major cit- and skills, and become part of the labor pool ies had universities, the Chinese university in regional economies (Jaffe, 1989). Linkages system was concentrated in Beijing and Shang- between URIs and industry also take a variety hai. The universities were severely affected by of forms such as joint R&D projects, technol- the Japanese invasion (1937–45) and the ensu- ogy licensing, consulting, internships, and other ing Civil War (1946–49). collaborations between firms and URIs to de- In 1949, the Communist Party led by Mao velop a product or technology (Kodama & Zedong was victorious. The victory resulted in Branscomb, 1999). a mass exodus of many professors appointed Recent research has shown that URIs can be by the previous regime, which eroded the capa- key elements in RISs because of the geographic bilities of tertiary level institutions. However, spillovers of knowledge both through their the new government increased its investment roles as a human capital provider and as a tech- in basic education creating a broad educational nology incubator. More recently, there has base. As in the earlier Confucian system, exam- been great interest in the role of universities inations were instituted nationally to identify as a source of spin-offs. There is substantial evi- the most capable students that could continue dence that universities around the world are for completely subsidized post-secondary edu- adopting a policy of encouraging entrepreneur- cation. The result has been an adequately edu- ship (Goldfarb & Henrekson, 2003; Rappert, cated population and a well-educated elite that Webster, & Charles, 1999; Shane, 2004). has been concentrated by the university system Framed in a slightly different way, Etzkowitz, in a few locations. Beijing and Shanghai were Wester, Gebhardt, and Terra (2000) observed the beneficiaries of this concentration, while that the university as an institution is moving Shenzhen, at least through the late 1970s, was toward a more entrepreneurial paradigm. De- irrelevant. spite the importance of universities in the local Upon the establishment of the People’s development plans, the relationship between Republic of China in 1949, China adopted the the RIS and local URIs should be understood Soviet Union’s model of comprehensive and in a national context. For this reason, the next specialized universities and a large network of UNIVERSITIES/RESEARCH INSTITUTES AND REGIONAL INNOVATION SYSTEMS 1059 research institutes. In 1978, the Chinese univer- China, while encouraging Chinese firms to sity model was again reformed to one that more improve their research capacity. Chinese resembled that of the United States and empha- private sector firms were able to ‘‘absorb’’ sized comprehensive universities (Pepper, 1996; advanced technology from foreign firms. From Wang, 2000). Universities did undertake re- the mid-1980s onward, the Chinese govern- search, but their most important priority was ment continually adjusted the S&T system to pedagogy. strengthen Chinese R&D and develop the Prior to the reforms initiated in late 1970s, country’s absorptive capacity (Cohen & Levin- government planners considered that innova- thal, 1990). tion was ‘‘an organized collective activity, gov- One of the most important reforms to the erned by research laws,’’ and these beliefs led to NIS came in the early 1980s, when the govern- an extremely linear and rigid model (Segal, ment driven by a desire to lower the cost of sup- 2003). This conceptualization proved to be inef- porting the URIs drastically cut their funding. fective as few research results were applied to For URIs, the only option was to search for industrial production. For all intents and pur- alternative sources of funds. The most signifi- poses, the science and technology (S&T) system cant of these was the establishment of URI- was isolated from industry. From the perspec- affiliated firms that were meant to generate tive of economic development, researchers in profit that the URIs could use to fund their the URIs had few linkages or interactions with operations. The government encouraged greater industry, and the centralized command system linkages between the URIs by encouraging for allocating research efforts led to a limited URI-affiliated enterprises, establishing fiscal scope and range of research activities (Lu, and legal services for professorial and student 2000). start-ups, strengthening patent laws (from what Whatever forward momentum the S&T sys- they were previously), building new technology tem developed in the 1950s and 1960s was industry zones (high-tech zones)/innovation brought to halt during 1966–76, while the Cul- centers/software industry bases near URIs, tural Revolution roiled the country, and led to providing innovation funds for small technol- an even greater isolation of the country from ogy-based firms, and supporting the establish- the outside world. After the death of Chair- ment of university science parks. Recognizing man Mao Zedong in 1976, Deng Xiaoping the need to promote technological progress, became the Chinese leader. He advocated fun- the central government also initiated large-scale damental reforms in the economy and the NIS national research programs on technologies system arguing that ‘‘science and technology (Kondo, 2003; Leydesdorff & Zeng, 2001). are the chief productive forces’’ and that These included the 863 Program/Plan (Baliusan China needed to learn from Western nations. Xiangmu/Jihua) targeting biotechnology, new As a result, the government began reforming materials, lasers, energy, information, and the old systems and began creating a market- robotics and space (Segal, 2003). oriented economy, launching the ‘‘Open Door The other prominent initiative was the Torch Policy,’’ decentralizing fiscal and managerial Program launched in 1988. It eased regulations, control, redefining public and private owner- provided support for building facilities to at- ship, and encouraging new linkages between tract foreign high-tech companies, and encour- research and production (Lu, 2000; Segal, aged the establishment of indigenous high-tech 2003). companies in special zones throughout China. The establishment and legitimization of These high-tech zones were built in close prox- private ownership allowed the economy to imity to URIs with the goal of promoting link- diversify, and small businesses and private ages between researchers and firms. According companies gradually became more significant. to The 2003 Annual Report on China Torch Pro- Concurrently, the state-owned enterprises were gram, 53 high-tech zones had been established increasingly pressed to compete in the market- since 1991 (Wu, 2004). These zones have experi- place. In conjunction with the development of enced rapid growth, though as Cao (2004) an internal market orientation, the ‘‘Open points out, much of this growth has been in Door Policy’’ attracted foreign direct invest- product assembly and thus does not represent ment (FDI). Foreign firms established manu- Western notions of high technology. By 2003, facturing facilities for export and later to the national high-tech zones (and state-level serve the domestic market. The government science and technology industrial parks) pressured foreign firms to do research in had received RMB155 billion 8 investments in 1060 WORLD DEVELOPMENT
1 infrastructure and hosted 32,857 companies. ceive approximately 2 2 times more funds than The total reported annual revenue in 2003 for do universities. these zones was RMB2,094 billion up from 8.7 China’s scientific capacity is expanding rap- billion in 1991, net profit grew from RMB800 idly. In terms of publications, China improved million to RMB113 billion, employment grew from 15th in terms of publications listed in from 67,000 in 1991 to 589,000 in 2003, and SCI, EI, and ISTP in 1990 to the fifth in 2003 exports increased from RMB100 million to with 93,352 publications listed (China Science RMB51 billion. In terms of research output, & Technology Statistics Net, 2005). Though these Zones increased their number of Chinese still at a very low base, the cumulative number patents from 933 in 1992 to nearly 7,000 in of US patents granted to Chinese inventors in 2002. The R&D personnel increased from China totaled 3,521 US patents, however the approximately 67,000 to over 589,000 in 2003 annual rate had increased from 294 in 2000 to (Zhang, 2004; Zhao, 2002, 2003a, 2003b). 597 in 2004. 9 Though the statistics and definitions are sus- Improving research at China’s URIs is an pect, there can be little doubt about the growth important component of the national S&T of economic activity within the zones. strategy. To facilitate this improvement the Over the last two decades, R&D investment government has been increasing URI funding. in China increased rapidly. The Chinese Na- For example, allocations to the URIs increased tional Bureau of Statistics calculates that in by 4% from 2000 to 2003 (China Science & 2003 the total R&D expenditure was RMB154 Technology Statistics Net, 2005). The percent- billion, an increase of 20% from 2002. The per- age of government funding in the expenditures centage of GDP invested in R&D grew from of research institutes increased from 53% in 0.6% in 1991 to 1.31% in 2003. Universities ex- 1991 to 71% in 2003, in absolute terms it was pended 10.5% of total R&D, while the RIs five times greater in 2003 than it was in 1991 spent 25.9%. The expenditures by RIs de- (see Table 1). Moreover, the research compo- creased from 42.8% of the total in 1996 to nent has increased while the development com- 25.9% in 2003, as companies increased their ponent has decreased, which is largely a result percentage of total spending from 43.3% in of the corporatization of many research insti- 1996 to 62.4% of the total in 2003 (China Sci- tutes that had commercial goals and the reori- ence & Technology Statistics Net, 2005). As entation of the remaining RIs to research. Figure 1 indicates, more than half of the The effect of this corporatization is responsible R&D funding in China is undertaken by the for the decrease in the number of R&D person- private sector, while the government is the main nel in 2001. source of R&D funding for URIs. It is also The universities also experienced a change important to note that research institutions re- from the 1980s when their budgets were cut.
Figure 1. R&D sources and distributions in China (2003, 100 million RMB). Source: China Science and Technology Statistics Net (2005). UNIVERSITIES/RESEARCH INSTITUTES AND REGIONAL INNOVATION SYSTEMS 1061
Table 1. R&D statistics of government research institutes (1991–2003, 100 million RMB) 1991 1994 1996 1998 2000 2001 2002 2003 S&T expenditure 170.7 308.9 409.1 479.7 495.7 557.9 620.2 681.3 Government support 93.5 158.2 192.9 244.7 377.4 434.9 498 535 Government/total (%) 53.2 48.87 44.24 45.29 67.46 69.47 70.86 71.28 R&D expenditure 78.8 128.7 172.9 234.3 258 288.5 351.3 399 Basic research (%) 6.2 8.2 6.5 7.5 9.8 11.6 11.6 11.8 Applied research (%) 27.4 29.8 27.4 28.1 25.9 27.7 34.5 35.3 Development (%) 66.4 62 66.1 64.4 64.3 60.6 53.9 52.9 R&D personnel (10,000) 27.4 25.7 23 22.7 22.7 20.5 20.6 20.4 Source: China Science and Technology Statistics Net (2005).
Amount From Government Total 350 300 250 200 150 100 50 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year
Figure 2. S&T funding in universities (1991–2003, 100 million RMB). S&T expenditures refer to R&D expenditure, application expenditure of R&D achievements, and S&T service expenditure including S&T personal service expenditure, S&T fixed asset expenditure, etc. Source: China Science and Technology Statistics Net (2005).
Since 2000, universities received more than 50% government pursued its policy of improving of their R&D expenditures from the gov- research performance in the universities. ernment (see Figure 2). In 2003, university In terms of sheer quantity, the output at the R&D expenditures were RMB16.23 billion, URIs has grown steadily. Prior to 1999, publi- RMB3.18 billion more than in 2002 (China Sci- cations and patenting had already begun ence & Technology Statistics Net, 2005). Thus, increasing (see Table 2), then decreased from R&D expenditures grew rapidly as the Chinese 1999 to 2001 due to 25% of the RIs being
Table 2. S&T achievements in S&T research institutes (1997–2003) International Patent Patent Invention International publications application approved patents approved patent 1997 8,396 2,249 1,110 457 18 1998 9,560 2,356 1,340 526 29 1999 9,531 2,488 1,687 669 24 2001 8,342 N/A 1,298 617 10 2003 10,000a 4,374 2,010 1,305 13 Source: Compiled by authors from the China Science and Technology Statistics Net (2005). a Estimates. 1062 WORLD DEVELOPMENT corporatized and removed from the base. The arm the Chinese Academy of Telecommunica- RIs that were corporatized during the restruc- tions Technology, Datang employs 4,000 per- turing had a total revenue of $34.3 billion and sons and in 2004 had annual revenues of sales income of $21 billion (China Science & approximately $300 million (Hoover’s, 2005). Technology Statistics Net, 2005). As of 1999, 15 firms from 13 different universi- The universities also have become more ac- ties had listed on various Chinese stock markets tive. In 2003, there were 63,600 papers with (Xue, 2005). This had increased to 29 firms in the first authors from universities listed in 2003 (Song, 2005). The total annual revenues SCI, EI, and ISTP. Since 2000, there has been of Beijing and Tsinghua University affiliated a dramatic growth in patents granted to univer- firms are nearing $2 billion each. Though only sity inventors. During 1988–99, Chinese patents 45% of all URI-affiliated enterprises are in approved ranged between 1,300 and 1,800. In high-technology fields (again the definition of 2003, universities applied for 10,252 Chinese high technology is quite loose), the URI-firms patents. This veritable wave of patent applica- in high technology produce more than 80% of tions continues to grow. In the first six months the total revenue (Ministry of Education, 2005). of 2004, there were 6,250 Chinese patent appli- In Beijing and Shanghai, local authorities cations from universities, an increase of 34% have established industrial parks affiliated with over the same period in 2003 (China Intellec- local universities. For example, the Zhong- tual Property Net, 2005.). The fact that the guancun area of Beijing, which is in close prox- number of foreign patents is not increasing sug- imity to CAS, and Beijing and Tsinghua gests that the output of high quality research Universities, is recognized as the largest con- remains roughly unchanged (Chinese Science centration of Chinese and MNC R&D facilities and Technology Statistics Net, 2005). in China (Cao, 2004; Zedtwitz, 2004; Zhou, 2005). In total, by the end of 2002, the 44 uni- (a) URI enterprises versity-established science parks had attracted RMB29.7 billion investments, employed The unique feature of the Chinese NIS is the 100,000 persons in 1,200 R&D centers, sup- URI-owned enterprises. Regardless of one’s ported 5,500 high-technology companies, incu- opinion of this strategy, and there are critics, bated 2,300 start-ups of which 920 have they have grown rapidly. The total revenues graduated, and 29 had been listed on the stock of the URI-affiliated enterprises has grown dra- exchange (Zhou, 2003). Despite these successes, matically (Table 3). The literature typically in 2007 there were press reports suggesting that focuses on three URI-related firms, Lenovo, some universities might go bankrupt because of Founder, and Stone Group. However, there the losses their affiliated firms were suffering. In are many more. For example, Datang Telecom- other words, the strategy of having universities munications Technology, a spin-off of the Min- operate for-profit firms was having potentially istry of Post and Telecommunications research negative consequences.
Table 3. University rank, revenue of their affiliated firms, and location (1999 and 2003, 100 million RMB) 1999 2003 Rank University Income Location University Income Location 1 Peking 87 Beijing Peking 163.60 Beijing 2 Tsinghua 32.4 Beijing Tsinghua 144.60 Beijing 3 Harbin Tech 9.5 Harbin Zhejiang 33.80 Hangzhou 4 Zhejiang 8.8 Hangzhou Xi’an Jiaotong 25.70 Xi’an 5 Northeast 8.6 Shenyang Northeast 24.00 Shenyang 6 Shanghai Jiaotong 8.2 Shanghai Tongji 22.30 Shanghai 7 Petroleum (East China) 7.6 Dongying Shanghai Jiaotong 19.00 Shanghai 8 Tongji 6.8 Shanghai Harbin Tech 15.30 Harbin 9 Tianjin 6.4 Tianjin Petroleum (East China) 13.90 Dongying 10 Nankai 5.9 Tianjin Fudan 13.60 Shanghai Source: Compiled by authors from the Center of S&T Development of the Ministry of Education (2005), the China Education and Research Network (2005). UNIVERSITIES/RESEARCH INSTITUTES AND REGIONAL INNOVATION SYSTEMS 1063
The university’s role in the Chinese NIS has The Beijing URIs not only function as human evolved dramatically over the last two decades. capital providers and core research centers for Local governments throughout China believe the entire country, but also have generated that universities and their affiliated technology spin-offs and established science parks to com- parks are important pillars of economic devel- mercialize their research and technologies. Bei- opment. In the next section, we examine the jing utilizes its rich URI resources to encourage role of URIs in Beijing and Shenzhen. high-tech development. Shenzhen, as a young city, is in a different position because only two decades ago, it had no URIs, and its indus- 4. TWO MODELS FOR URI trial growth did not rely on local URIs. Shenz- INVOLVEMENT IN LOCAL ECONOMIC hen firms developed their own internal R&D DEVELOPMENT capacities utilizing foreign technology and at- tracted educated Chinese from around the The deregulation of the Chinese economy country. URIs were established later to meet also included a significant devolution of deci- the demand of the rapid high-tech develop- sion-making to local jurisdictions and organi- ment, and only recently have begun to play a zations, thereby providing latitude for role in the local economy. Figures 3 and 4 pro- creating their own models. Due to the different vide stylized depictions of the URI–industry historical background and the stage of develop- linkages in Beijing and Shenzhen. ment of Beijing and Shenzhen and their respec- tive URIs, different strategies for forming and cultivating URI–industry linkages evolved. 5. BEIJING
Beijing is the political, educational, and S&T Traditional URIs capital of China. In 2003, 71 universities and 371 research institutes were located in Beijing Beijing Statistical Information Net, 2005,by far the largest concentration in any Chinese city. The most prominent of these were the Chi- URIs spin-offs nese Academy of Sciences, Peking University, and university science and Tsinghua University, all of which are located in the Haidian District. The Haidian district is the location of the Zhongguancun Industrialization and commercialization Science Park (ZGC), the earliest and most of technological innovation important concentration of IT-related firms in China. Given a concerted effort that began in the 1980s to move industrial production out Figure 3. URI-industry model in Beijing. of Beijing, high-technology firms have become
Industrial growth with no URIs URIs in other regions
Local high-tech enterprises URI-affiliated research institutes and virtual campus
Industrialization and commercialization of technological innovation
Figure 4. URI-industry model in Shenzhen. 1064 WORLD DEVELOPMENT a primary force for economic growth in Beijing. tracts, Beijing’s URIs captured more than As an indicator of the importance of high tech- 20% of the total contract revenue for the entire nology, in 1999 high-technology businesses ac- country (see Table 5). counted for 25.4% of the city’s total industrial However, the commercialization of the value added, and rose to 39.3% in 2004 (Beijing Beijing URIs is not the commercialization of Statistical Information Net, 2005). Given this research results, but rather the transfer of success, the municipal government has focused personnel from non-commercial activities such on encouraging further growth (Li, 2000). as teaching and research to the commercial sec- In 2004, Beijing was rated as the top Chinese tor. For example, many of the early spin-offs city in terms of S&T capacity (Chinese Acad- simply provided technology services to other emy of Social Sciences, 2004). In 2000, 25% of firms. Skilled personnel were more significant government S&T funds were allocated to Bei- than research results. The technology being jing institutions while 18% of all R&D funds transferred was not comparable to that gener- were expended in Beijing and 18% of all patents ated by US universities such as MIT and Stan- were granted to entities located in Beijing (Bei- ford, but rather was adequate for the Chinese jing Statistical Information Net, 2005). Thirty- market. Despite these caveats, what is signifi- three percent of all research institute R&D cant is that a few spin-offs became important spending and 20% of university R&D spending Chinese IT firms, and Lenovo has managed to took place in Beijing. In 2003, total R&D become a global player. spending in Beijing reached RMB25.63 billion, of which government funding accounted for (a) Research institutes RMB13.67 billion; Chinese companies, RMB8.42 billion; foreign companies, Beijing is home to more research institutes RMB0.96 billion; and other institutions and than any other Chinese city. Though the Chi- organizations, RMB2.57 billion (Beijing Statis- nese Academy of Sciences (CAS), which was tical Information Net, 2005). founded in 1949, has institutes throughout Chi- Beijing’s success is mirrored in various objec- na, the largest and most prestigious are located tive indicators of performance. For example, in Beijing. In the 1980s, CAS shifted from de- since 1995 Beijing has received between 17% fense-related research toward conducting and 21% of total patent approvals (see Table R&D that had greater commercial application. 4). In terms of URI-industry technology con- In the process, CAS was corporatized and the
Table 4. Invention patents approved by region (1995–2000) 1995 1996 1997 1998 1999 2000 Beijing 328 246 281 309 573 1,074 Liaoning 131 118 131 131 224 458 Shanghai 72 74 88 97 189 304 Jiangsu 72 98 106 85 167 341 Shandong 84 84 96 91 172 363 Guangdong 56 57 49 77 123 261 Country 1,530 1,383 1,472 1,574 3,097 6,177 Beijing/country (%) 21.4 17.8 19.1 19.6 18.5 17.4 Source: Beijing Municipal Science and Technology Commission (2005).
Table 5. Technology contract value in Beijing and in China (1999–2003, 100 million RMB) Year 1999 2000 2001 2002 2003 Country 523.5 650.8 782.5 884.2 1084.7 Beijing 92.2 140.3 191 221.1 265.4 Beijing/country (%) 17.6 21.6 24.4 25 24.5 Source: Beijing Statistical Information Net (2005). UNIVERSITIES/RESEARCH INSTITUTES AND REGIONAL INNOVATION SYSTEMS 1065 number of institutes was reduced to increase research and the system of technology commer- efficiency, better reflect the market, and to cialization under one organizational roof’’ (Lu, encourage its staff to establish new firms (Kon- 2000). CAS supported Lenovo with preferential do, 2003). In 2005, CAS employed approxi- treatment including allowing full autonomy in mately 37,000 scientists and engineer, more managerial decision-making, financial budget- than 20,000 graduate students, and 1,000 post- ing, employee recruitment, full access to CAS doctoral scholars. In 2003, CAS expended resources, and use of the institute’s name in RMB8.28 billion on R&D (http://www.cas.cn) making business deals (Lu, 2000). Though and was China’s leading URI in terms of pub- CAS owns a controlling interest, Lenovo enjoys lications and patents. substantial autonomy. The benefit for CAS is In response to the economic reforms and the from the fixed sum of earnings that Lenovo restructuring of the S&T system in the 1980s, transfers to CAS each year. CAS established a Technology Licensing Office CAS is by far the most successful of the gov- (TLO), and with the local government, ernment research institutes in spinning off established an ‘‘S&T Development Center’’ in firms. But Datang shows that there are other Haidian District to facilitate the commerciali- cases. In effect, the RIs were large concentra- zation of CAS research. CAS also formed a tions of commercially under-utilized skilled venture capital firm, China Science and Tech- labor power. By providing access to facilities nology Promotion and Economic Investment and guaranteeing the salaries of the entrepre- Company, to support CAS staff establishing neurs, the RIs lowered the risks, thereby per- start-ups (Kondo, 2003). As of 2004, CAS has forming a function like that of a venture invested in and spun off more than 400 high- capitalist in an environment that in the early tech enterprises, eight of which have been 1980s could not have supported true venture publicly listed. In 2003, the gross revenue of capital either ideologically or economically. the CAS affiliated enterprises was RMB53.37 billion and they had a net profit of RMB2.03 (b) Universities billion (Chinese Academy of Sciences, 2005). The most successful company to emerge from Beijing is the center of the Chinese university CAS was the Lenovo Group Limited (formerly education system. In the latest university rank- called the Legend Group). Lenovo was founded ing 20% of the top 100 universities of China are by eleven CAS Institute of Computing Tech- located in Beijing (Shanghai Jiaotong Univer- nology (ICT) scientists in November 1984 in sity, 2005). Of the eight Chinese universities the Zhongguancun Region with a RMB listed in the top 100 Asian Pacific universities, 200,000 start-up loan from CAS. The founders the top two are Tsinghua University (THU) remained institute employees even as they and Peking University (PKU) (Shanghai Jiao- worked at the firm, and CAS provided technol- tong University, 2005). Not only are THU ogies, the loan, and office space as well as re- and PKU the most prestigious Chinese research search facilities. The decision to start Lenovo universities, they also are the national leaders in in ZGC was sparked by a government initiative commercialization (see Table 3). In 2002, there to reform the national S&T system giving rise were 26,038 S&T employees in the universities. to new non-government S&T enterprises The local universities were responsible for (Lazonick, 2004; Lu, 2000). Today, Lenovo is 47.58% of the publications and 36% of all Chi- the largest Chinese IT company, and since nese patents allocated to entities in Beijing in 1996 it has been China’s sales leader. In 2004, 2000 (Beijing Statistical Information Net, Lenovo reported a turnover of HK$23.2 billion 2005). and net profit of HK$1.05 billion (Lenovo, Beijing universities have developed close rela- 2006). With its 2005 acquisition of IBM’s per- tionships with industry through joint projects, sonal computer (PC) business, Lenovo has be- professional consulting, and training. In 2000, come the world’s third largest PC firm in among 8,278 research projects underway in Bei- terms of sales. jing universities, 1,540 of them were conducted As a CAS-affiliated company, Lenovo bene- in cooperation with firms, and another 795 fited from the economic reforms as well as the were technology service contracts. In order to institutional and organizational restructuring promote the commercialization of university re- of China’s S&T system. This enterprise model search results and patent licensing, Beijing uni- is known as ‘‘one academy, two systems’’ and versities signed 1,159 technology transfer is ‘‘a symbiosis between the system of scientific contracts with industry worth RMB811.95 1066 WORLD DEVELOPMENT
Table 6. University-affiliated enterprise sales income rank by region (1998–2002, 100 million RMB) Year Rank 1 2 3 4 5 1998 Beijing Shanghai Jiangsu Sichuan Liaoning 121.28 38.78 23.99 14 12.91 1999 Beijing Shanghai Jiangsu Liaoning Guangdong 146.93 40.23 24.69 18.2 15.98 2000 Beijing Shanghai Jiangsu Tianjin Liaoning 200.81 53.82 27.56 26.18 24.21 2001 Beijing Shanghai Tianjin Jiangsu Liaoning 261.85 59.71 32.6 32.52 32.46 2002 Beijing Shanghai Jiangsu Liaoning Shandong 299.55 76.95 40.07 36.09 33.85 Source: Compiled by authors from the Ministry of Education (2005) and the China Education and Research Network (2005). million. But the most striking relationship is internal Technology Licensing Organization through spin-offs and the ownership of for- (TLO) to promote technology transfer and profit enterprises. Put simply, Beijing has the industrial cooperation. In 2001, THU signed most university-affiliated enterprises and they 828 research contracts worth RMB432 million are the largest in terms of sales and profit (see and 534 technology transfer contracts worth Table 6). RMB234 million (Beijing Statistical Informa- The two leading universities in terms of com- tion Net, 2005). mercialization are THU and PKU. As China’s In addition to active collaboration with indus- premier technical university, THU has a strong try through joint projects and technology trans- endowment of personnel. In 2005, THU housed fer, THU established firms to commercialize its 11 national key research labs, employed over inventions. In 1922, the first university-affiliated 7,800 faculty and staff, and served more than firm at THU was established to create internship 27,000 students (Tsinghua University, 2005). and apprenticeship opportunities for students. In terms of R&D funding, it leads the country Early on, the firms did not have many market- in the number of patents and publications (see oriented or commercial activities, yet they did Table 7). In total, in 2001 THU expended provide services such as managing guest houses RMB 724 million on research, of which RMB and print shops. 10 Since the early 1980s, these 323 million was from the private sector; the enterprises have been required to generate prof- remainder was largely from the government its. In 1980, THU established Tsinghua Tech- sector (Beijing Statistical Information Net, nology Service Company to utilize THU 2005). For example, in 2004 THU had 527 pat- personnel to provide technical services to the ents approved and ranked first in the country marketplace. By the early 1990s, more than (Center of S&T Development Ministry of Edu- 190 companies had been created by the profes- cation, 2005). As was the case with CAS, THU sors and staff at THU or in partnerships with is actively involved in commercializing faculty companies outside the university. Some firms re- and staff inventions. In 1991, it established an mained small and were based in the professor’s
Table 7. THU S&T achievement statistics (1999–2003) Year Patent application Patent approved Number of contract Contract revenue (10 thousand) 1999 189 121 341 18,367 2000 344 135 534 23,500 2001 396 163 534 23,400 2003 N/A N/A N/A N/A Internet Edition. Source: Compiled by authors from the Beijing Statistical Information Net (2005) and the Center of S&D Devel- opment of the Ministry of Education (2005). UNIVERSITIES/RESEARCH INSTITUTES AND REGIONAL INNOVATION SYSTEMS 1067 or researcher’s labs. However, there were other serves as an incubator to develop start-ups, affiliated firms such as Tsinghua Tongfang and many of which are operated by university alum- Tsinghua Unisplendour that grew sufficiently ni and former students who have returned to large to make public stock offerings. China from overseas. As THU’s commercial activities grew, man- In 2001, a professional incubator company, agement of the disparate firms became more Tsinghua Business Incubator Co. (THBI) was complicated. To assist the growing number of set up in the park to help startups secure finan- spin-off companies and accelerate the commer- cial support, including venture capital from cialization of technologies, THU built its own various companies, loans from banks, govern- university science park as an incubator in ment funding, and a RMB200 million invest- 1994 and established Tsinghua University ment fund for returning students from Enterprise Group in 1995. By 2002, the total as- overseas. In addition, it provides concessions, sets of the Group had grown to RMB17.8 bil- including free incubation space for the first lion, and gross income reached RMB11.4 year, preferential rents for the first two years, billion. In 2003, THU’s assets were capitalized introductions to professional consulting ser- at RMB22.7 billion—in comparison PKU’s as- vices, and assistance in networking with various sets were worth RMB14.8 billion. The revenues institutions and organizations. In 2003, THBI grew rapidly reaching RMB15.22 billion in incubated 70 start-ups and 27 graduated. 2003 (http://www.cutech.edu.cn). Because of The university spin-off companies help com- the increasing size and complexity of THU’s mercialize research results and produce profits business operations and the necessity of provid- to finance university research and employee’s ing professional management, in 1995 Tsinghua welfare (Kondo, 2003). The close organiza- Holding Company (THC) was established to tional tie between the university and the spin- manage various spin-off enterprises and to in- offs integrates postgraduate education into vest in new companies. THC was better able industrial R&D (Lazonick, 2004). The spin-off to rationalize the businesses including improv- companies provide internship opportunities to ing the process of evaluating the provision of students at the university, many of whom are capital to spin-offs, the culling of less successful hired directly after graduation. Meanwhile, firms, and a standardization in the naming of the companies receive access to S&T resources, firms in the THU group. By 2004, the THC university facilities, and the benefit of THU’s had 30 technology-based spin-offs and approx- name when doing business with other enter- imately 30 service-oriented companies such as prises. the university press, hospitals, and logistic com- Beijing with its preeminent endowment of panies, three of which are ranked as the top 10 URIs in both number and quality has benefited profitable university enterprises in China (Chi- from commercialization. THU and CAS are na Education & Research Network, 2005). examples of how Chinese URIs have commer- Through the establishment of a science park cialized both some of their research staff and on campus in 1993, THU encouraged linkages their inventions. Other Beijing universities such between the university and industry. By 2003, as PKU, China Agricultural University (CAU), the park had grown to 300 thousand square Beijing University of Posts and Telecommuni- meters, and by the end of 2005 is expected to cations (BUPT), and Beijing University of have 690 thousand square meters of space Aeronautics and Astronautics (BUAA) also (Mei, 2004). Currently, the science park houses are encouraging commercialization of their re- more than 300 different institutes including na- search results. PKU has commercialized a num- tional research labs; R&D centers for various ber of its inventions through its spin-offs. multinational corporations such as Sun Micro- Established in 1985, PKU’s spin-off, the Foun- systems, Proctor & Gamble, and NEC; the der Group, currently is the largest university headquarters of the university enterprises enterprise in China with a total revenue of including Tongfang, Unisplendour and Zhich- RMB22 billion in 2004. It is dominant in the eng; and various firms in financial, law and markets for Chinese-language electronics pub- consulting services, and professional and edu- lishing systems in Asia, the US, and Europe. cational training (Mei, 2004). The space utiliza- Founder’s professional technology in picto- tion has prompted some to conclude that these graphic-language electronic publishing systems science parks are, in some measure, real estate originated in a government-led R&D project development schemes. The science park also which a PKU professor worked on as the chief 1068 WORLD DEVELOPMENT designer (Lu, 2000). Founder not only contin- success and the city grew rapidly. Since 1979, ues to develop its electronic publishing system, its GDP has grown at an average rate of 30% but has entered other businesses such as per- per annum. Today, Shenzhen is an important sonal computer assembly. economic center (see Table 8). In recent years, CAU has spin-offs commercializing trans- Shenzhen has become one of the top five Chi- genic technologies, which generated revenue nese cities in terms of GDP. Its GDP per capita of over RMB500 million in 2004. BUPT has was over $7,400 in 2004, which was the highest developed enterprises commercializing com- in China. puter networking technology and telecommuni- Shenzhen’s success is the result of favorable cation software. BUAA owns more than forty policies, geographic advantages, visionary spin-offs. Recently, it established a science park planning, deliberate development of a strong in ZGC to incubate start-ups. All of these URIs industrial structure, and an entrepreneurial have affiliated for-profit firms commercializing institutional and organizational framework. their particular expertise. The Chinese Academy of Social Sciences For Beijing, which has been a government (2005) rated Shenzhen as the second most com- city with little industry and a relatively weak petitive Chinese city trailing only Shanghai. commercial tradition, the commercialization These factors allowed Shenzhen to attract tal- of university research has provided an impor- ented personnel from throughout China and tant source of employment and taxes. Beijing investment from around the world. municipal officials have decided that future As Shenzhen grew, labor and infrastructure growth is dependent upon training and retain- costs inexorably rose. The municipal govern- ing the talented students coming to Beijing to ment recognized that Shenzhen could not study. remain successful as a center for low-cost assembly—it had to develop an innovation sys- tem. In response, it devised a strategy to encourage higher technology business activities. 6. SHENZHEN In pursuit of this goal, the municipal govern- ment has built office parks to attract high-tech- In 1979, Shenzhen, which is located close to nology firms, MNC R&D, and encourage the Hong Kong, was a fishing village and had no entry of local high-technology firms. The lead- local academic institutions. In 1980, it was des- ing examples of the new firms driving the ignated as a ‘‘special economic zone’’ by the growth of Shenzhen are the communications Central Government and the State Council of technology firms, Huawei Technologies and Guangdong Province. Established as a plat- Zhongxing Telecommunications (ZTE). How- form to experiment with market reforms and ever, many smaller technology-based firms to act as a base for the relocation of manufac- have also appeared. turing from Hong Kong, it was given the status The roots of Shenzhen’s movement up the of free trade zone so that goods could be value-added ladder can be traced to 1985, when imported and exported without duty. Multi- the municipal government and CAS jointly national firms established manufacturing facili- established the Shenzhen Science and Technol- ties there to draw upon a vast pool of relatively ogy Industrial Park. In 1996, Shenzhen estab- unskilled but inexpensive labor. lished the national-level Shenzhen High-Tech Shenzhen grew rapidly as a center for manu- Industrial Park (SHIP) (Li, 2000). In 2005, facturing for export. The policy was a massive SHIP encompassed an area of 11.5 km2.As
Table 8. Shenzhen S&T statistics (2000–04, 100 million RMB) Year GDP High-tech Indigenous High-tech company S&T S&T personnel Patent output value technology value number funding (10,000) approvals 2000 1,665.24 1,064.45 532.4 212 2.5 15.89 2,401 2001 1,954.17 1,321.36 697.96 314 2.8 17.23 3,506 2002 2,239.41 1,709.92 954.48 422 3.25 18.64 4,496 2003 2,860.51 2,482.79 1,386.64 673 3.18 57.54 4,937 2004 3,422.80 3,266.52 1,853.09 943 5.3 66.34 7,737 Source: Compiled by authors from the Shenzhen Annual Reports on Shenzhen Government Online (2005). UNIVERSITIES/RESEARCH INSTITUTES AND REGIONAL INNOVATION SYSTEMS 1069 with most Chinese industrial parks, there is lit- These incentives were so attractive that with- tle apparent specialization as it welcomes firms in five years 43 URIs including five Hong Kong from nearly every industry and it also aims to universities and one French university (Cent- improve traditional industries by making use rale Lyonais) located branches at UVC. Eight of high technology and advanced applicable technology-based incubators are incubating technologies (Shenzhen Industrial Park Net, 252 enterprises, and 217 technologies have been 2005). transferred. The campus houses 78 research In 2004, the value of production in Shenzhen labs and centers including 42 national key re- reached RMB245.4 billion, 11 times that of search labs and engineering centers (Shenzhen 1996. In contrast to Beijing, 90% of the R&D Industrial Park Net, 2005). In 2000, a univer- in Shenzhen is conducted by firms, and 80% sity town was created within SHIP, where of all R&D funding originates from firms. In THU, PKU, Nankai University, and Harbin 2003, R&D expenditures were RMB7.2 bil- Institute of Technology have set up full-time lion—an increase of 19.8% over 2002. The larg- graduate schools. By 2004, more than 50,000 est high-tech enterprise, Huawei Technologies students had studied at UVC and 10,000 invested RMB3 billion in R&D. The number students had graduated with a master’s or a of patents has increased annually (see Table 8). Ph.D. degree. Over 120 high-tech enterprises Only Beijing and Shanghai had more Chinese were established by the universities and more patents granted than Shenzhen. Moreover, the than 100 research projects from the universities growth in patenting was stunning. The applica- were transferred to industry. Despite beginning tions, for example, grew from 1,440 in 1997 to with no URIs, the local Shenzhen government 12,361 in 2003 (Shenzhen Intellectual Property was able to implement policies to attract URIs. Net, 2005). In the case of Shenzhen, it was economic suc- Shenzhen had a different growth trajectory cess that drove the development of a higher and concomitant model by which universities education infrastructure. In return, the estab- were meant to contribute to the cities develop- lishment of numerous educational facilities ment (see Figure 3). Already, in the early 1980s, make Shenzhen more attractive as a destination the municipal government believed that the for educated Chinese because of the ability to lack of institutions of higher education and re- pursue higher degrees from prestigious URIs search would become an obstacle to industrial locally. Thus the relocated URI branches may upgrading. In response, Shenzhen University operate as an attraction and retention strategy was established in 1983 and a technology-based for highly trained engineers and scientists. college, Shenzhen Polytechnic, in 1993. In the Whether the educational institutions are mak- 1990s, the municipal government decided that ing Shenzhen a research center is not yet cer- these were not sufficient and embarked upon tain. What is certain is that Shenzhen is being a strategy of attracting URIs to the area. Its transformed from a low-cost production center first success was convincing THU to establish into a location for undertaking higher value- Shenzhen Tsinghua Research Institute in SHIP. added activity. The addition of university Later, PKU, CAS, Chinese Academy of Engi- branch campuses can only contribute to that neering, and Hong Kong University of Science process, and over time these branch campuses & Technology also set up research bases in may also be improved. Shenzhen. To increase cooperation with the existing university branches and encourage yet more URIs to come to Shenzhen, the municipal 7. DISCUSSION government established the ‘‘virtual campus’’ concept in SHIP in 2000. As an incentive for URIs have been significant contributors to URIs to establish branches at the University the growth of the Chinese economy. In terms Virtual Campus (UVC), the municipal govern- of economic activity, the commercialization of ment offers free office space and infrastructure Chinese universities and their personnel has including furniture, computers, telephones, made an impact on a few of the leading univer- and computer networks for the first two years. sities in the major cities. In the case of Beijing, a It also provides long-term passes to Hong RIS built upon the URIs has emerged. CAS, Kong 11 for staff, transportation, printing, THU, and PKU have been the sources of firms computer server, rooms for meeting and teach- that are now among the largest IT firms in Chi- ing, apartments for staff, and other amenities at na. For the universities suffering from budget highly subsidized prices. cuts successful commercialization is seen as a 1070 WORLD DEVELOPMENT source of funds. Beijing as the leading city in engineers, but requires aesthetics and innova- the China’s S&T system has developed success- tion. Will these be abandoned in the university ful URI-industry linkages, particularly through that operates more like a profit making firm spin-offs and university science parks. URIs are than as an institution in the pursuit of knowl- one of the fundamental forces in the establish- edge and pedagogy? ment and development of technology-based There are operational difficulties, also. Be- firms in Beijing. For economic growth, Beijing cause of the nature of these arrangements, the has relied upon the knowledge and human actual ownership of firms may be unclear. For resources in the URIs. example, there have been conflicts regarding Whereas the URIs have contributed to the the remittances the spin-offs should provide to development of the Beijing economy, in Shenz- their mother institutions. For example, in the hen economic growth occurred prior to the case of the largest university spin-off PKU’s development of institutions of higher educa- Founder Group, the company’s first president tion. However, the municipal government real- was fired by PKU because of his unwillingness izing the importance of upgrading its economic to increase payments to levels that the univer- base is actively working to create a higher edu- sity felt were ‘‘reasonable’’ (Fan, 1999). The dif- cation infrastructure to contribute to that pro- ficulty here is that university bureaucrats may cess. Though research is clearly a part of the become too involved in the operation of the Shenzhen strategy, there can be little doubt that firm, thereby harming the firm. There is evi- the university’s most important function is to dence that URI-affiliated firms under perform provide for educational upgrading. similar non-affiliated firms. Based on a study Chinese universities like those in other coun- by the Administrative Committee of ZGC and tries have a role of selecting and educating the PKU Network Economics Research Center workers of tomorrow—a task that will become (2004) it was found that from 1995 to 2003 uni- even more vital in the emerging knowledge econ- versity spin-offs in ZGC had far greater imma- omy. The elite universities are critical because terial assets and a greater proportion of they have proven to be pathways for the best personnel with higher education, but some of Chinese students to prepare to go on to foreign the spin-offs are under-performing in technol- universities that provide global-class training. ogy commercialization. These enterprises on As in other countries, there has been concern average made a net profit equal to only half that the commercialization of Chinese URIs will that of the non-affiliated companies in ZGC. affect research and teaching. 12 There are reports The university-affiliated spin-offs had exports that some professors are so engrossed in their which were only one-sixth of those in nonaffili- commercial activities that they exploit their ac- ated companies. Underperforming university cess to institute or university resources and re- spin-offs paid less tax and were less productive search facilities. There is concern that students in patenting than nonaffiliated companies. Le- are being used as cheap labor with little attention novo and Founder, etc. are still the most suc- to research quality or pedagogy. These are seri- cessful firms in ZGC. The report attributes ous, but, perhaps, of even greater concern may this under performance to a lack of clarity in be the involvement of the university and its ownership, ineffective personnel relations, and administrators in the daily operation of com- the lack of capital and management supervisory mercial enterprises. This might skew university systems. decision-making regarding research funding, There is variability in performance and re- faculty hiring and promotion, and even lead to source distribution among university enter- universities making decisions that are in their prises. The revenues generated by PKU and economic best interest, but are antithetical to THU spin-offs account for more than half of the interests of the society as a whole. the total revenue generated by all spin-offs. In many countries, URIs have been impor- Interestingly enough, PKU and THU also re- tant repositories of the humanities, culture, ceive much greater research funding from gov- and the arts. Will the commercialized Chinese ernment than universities in other regions. URIs where departments and laboratories Finally, in cities like Beijing and Shanghai that operate as profit centers protect the unprofit- are undergoing real estate speculation, the able humanities and arts? Creativity and de- building of university science parks may have sign, which many believe is as important in also been aimed as much at creating rentable global competition as engineering and produc- office space as they were toward incubating tion, does not stem solely from well-trained and transferring technology. UNIVERSITIES/RESEARCH INSTITUTES AND REGIONAL INNOVATION SYSTEMS 1071
8. CONCLUSION provide evidence of success. In the case of Bei- jing, the URIs have provided the seeds for a The NIS literature initially treated the na- number of significant firms, and some spin-offs tion-state as the appropriate unit of analysis have grown to be large businesses. In Shenzhen for understanding innovation systems. Our thus far URIs were not the origins of significant study has shown that the national level was spin-offs, the source of successful firms such as important, but there are clear differences in Huawei and ZTE are quite different. Chinese regions. This also suggests that analy- Because Chinese universities actually own sis treating China as being a monolithic entity and operate firms, one could argue that they misses the nuance in how China innovates. have the closest relationship with the private Our study, which confirms Segal (2003) findings sector of any universities in the world. In the regarding the importance of local officials in case of the elite universities, the number of developing the evolutionary trajectories of their firms owned by the university can be in the regions, shows that Beijing and Shenzhen, hundreds and include everything from high- starting with different endowments, established technology start-ups to low-tech service firms. remarkably different methodologies for devel- Some firms having their roots in Chinese URIs oping their technology clusters. Without a such as Lenovo, Dongfang and Founder, are doubt, China has built a unique relationship among the largest and most important Chinese between its URIs and industry. In most coun- technology firms. From this perspective, tries, some separation between universities Chinese policy has had tremendous success in and industry has been considered healthy, in tapping the capabilities of universities and China URIs own and operate firms. researchers. For other developing countries Chinese local authorities place great faith in that have strong URIs, the Chinese model is the economic development benefits of URI- worthy of study. The direction which Chinese developed technology. This is evidenced by the URI–industry relationships evolve is of signifi- detailed statistics that have been collected to cance to China and the world.
NOTES
1. There is an enormous literature on Silicon Valley and 6. For a critique of this explanation, see Kenney and Boston. Some work compares the two regions (Fleming von Burg (1999). For partial corroboration of Kenney et al., 2004, Kenney & von Burg, 1999; Saxenian, 1994) and Burg, see Fleming et al. (2004) who finds that particularly in biotechnology (Powell, Koput, Bowie, & ‘‘simple characterizations of Boston secrecy and autarky Smith-Doerr, 2002; Zhang & Patel, 2005). vs. Silicon Valley cooperation and interdependence fail to reflect the tension between managers and engineers on 2. For a discussion of the roots of venture capital in the both coasts.’’ On path dependency, see David (1986) and United States, see Etzkowitz (1999) and Hsu and Arthur (1994). Kenney (2005). 7. On development trajectories, see Dosi (1988). 3. An important exception is Bresnahan and Gam- bardella (2004). 8. The exchange rate is around RMB8.3 to US$1. 4. Definitions of high-technology are always difficult. In China high technology industries these include almost 9. It is impossible to assess the quality of these patents. anything in the IT and software industries and includes Also, we do not know whether these were granted to quite routine work such as PC assembly. There is no way MNCs operating in China or indigenous Chinese of separating these out, and we believe a credible organizations. If China is similar to Japan, Korea, and argument can be made that even assembling such Taiwan, then it is likely that their patents will improve electronics items can over time lead to greater value- over time. added creation as the cases of Japan, Korea, and Taiwan have demonstrated. 10. This was not unique to China as universities in 5. On industry differences, see differences between many countries manage activities such as dormitories biotechnology and IT in Kenney and Patton (2005). and university presses. 1072 WORLD DEVELOPMENT
11. The long-term pass is important because there are 12. For discussion of these concerns in relation to US still immigration controls that limit those who can enter universities, see Bok (2004), Kenney (1986), and Slaugh- Hong Kong. For persons working in Shenzhen the ability ter and Leslie (1997). to visit or live in Hong Kong is an important perk.
REFERENCES
Adas, M. (1989). Machines as the measure of man. David, P. (1986). Clio and the economics of QWERTY. Ithaca, NY: Cornell University Press. American Economic Review Proceedings, 75, Administrative Committee of ZGC and PKU Network 332–337. Economics Research Center. (2004). Analytical Re- Doloreux, D. (2003). Regional innovation systems in the port on University-affiliated Enterprises in ZGC: periphery: The case of the Beauce in Quebec (Can- Current Situation and Problem. (Unpublished paper ada). International Journal of Innovation Manage- presented at Stanford University). ment, 7(1), 67–94. Arora, A., Gambardella, A., & Torrisi, S. (2004). In the Dosi, G. (1988). Sources, procedures and microeco- footsteps of Silicon Valley? Indian and Irish software nomic effects of innovation. Journal of Economic in the international division of labor. In T. Bresna- Literature., 26, 1120–1171. han, & A. Gambardella (Eds.), Building high-tech Edquist, C. (2004). Systems of innovation—a critical regions (pp. 78–120). Cambridge: Cambridge Uni- review of the state of the art. In J. Fagerberg, D. versity Press. Mowery, & R. Nelson (Eds.), Handbook of innova- Arthur, W. B. (1994). Increasing returns and path tion. Oxford: Oxford University Press. dependence in the economy. Ann Arbor: University Etzkowitz, H. (1999). The second academic revolution: of Michigan Press. MIT and the rise of entrepreneurial science. London: Beijing Municipal Science and Technology Commission. Gordon and Breach. (2005).
Kenney, M., & Patton, D. (2005). Entrepreneurial Nelson, R. R., & Rosenberg, N. (1993). Technical geographies: support networks in three high-tech innovation and national systems. In R. R. Nelson industries. Economic Geography, 81(2), 201–228. (Ed.), National innovation systems: A comparative Kenney, M., & von Burg, U. (1999). Technology and analysis (pp. 3–21). New York: Oxford University path dependence: the divergence between silicon Press. valley and route 128. Industrial and Corporate Niosi, J. (2005). Canada’s regional innovation system: Change, 8(1), 67–103. The science-based industries. Quebec: McGill-Queens Kodama, F., & Branscomb, L. M. (1999). University University Press. research as an engine for growth: how realistic is the Noble, G. W. (2000). Conspicuous failures and hidden vision? In L. M. Branscomb, F. Kodama, & R. strengths of the ITRI model: Taiwan’s technology Florida (Eds.), Industrializing knowledge: University- policy toward hard disk drives and CD-ROMs industry linkages in Japan and the United States UCSD. The Information Storage Industry Center (pp. 3–19). London: MIT Press. Report. 2000–02 (March). Kondo, M. (2003). The Chinese model to create high- Pepper, S. (1996). Radicalism and education reform in tech start-ups from universities and research insti- 20th-century China. Cambridge: Cambridge Univer- tutes. Management of technology: Growth through sity Press. business innovation and entrepreneurship. In Zedt- Porter, M. E., & Stern, S. (2001). Innovation: location witz, M., Haou, G., Khalil, T. M., & Lefebvre, L. A. matters. Sloan Management Review, (Summer), 28–36. (Eds.), Pergamon the tenth international conference on Powell, W. W., Koput, K. W., Bowie, J. I., & Smith- management of technology. Doerr, L. (2002). The spatial clustering of science Lazonick, W. (2004). Indigenous innovation and eco- and capital: Accounting for biotech firm-venture. nomic development: Lessons from China’s leap into Capital relationships. Regional Studies, 36(3), the information age. Journal of Industry Studies, 11, 291–305. 273–298. Rappert, B., Webster, A., & Charles, D. (1999). Making Lenovo, Inc. (2006).
Wang, C. (2000). From manpower supply to economic Zhao, Y. (Ed.) (2002). Annual Report on China Torch revival: Governance and financing of Chinese higher Program 2001. Ministry of Science and Technology education. Education Policy Analysis Archives, 8(26). Torch High Technology Industry Development