By Li Shantong, Department of Development Strategy and Regional Economy of DRC, & Gao Chunliang of Nanjing University of Finance & Economics

Research Report No 141, 2015 (Total 4826)

Abstract:

Transformation to innovation-driven economy is an important way for China to address challenges under the new normal. Attention should be paid to industrial and spatial characteristics of innovation so as to prevent the incentive mechanism from being twisted and the R&D resources from being mismatched. This paper reviews pertinent literature related to research on innovation and concludes that the spatial dimension and the industrial dimension of innovation display strong correlation, viz. big cities boast prominent comparative advantages in innovation and commercialization while small and medium-sized cities are more capable of undertaking manufacturing projects during the commercialization of technological innovation. Based on such analysis, the paper believes that two principles should be adhered to in the policy making of innovation-driven strategy: 1. Innovation activity should match city grading. Focus should thus be made on supporting the innovation and commercialization of mega cities including Beijing and Shanghai and some of the big cities could draw on Taiwan's model of "Research Institute of Industrial Technology" to boost innovation of local competitive industries. 2. Industrial innovation should match city grading. Counties, county-level cities and most prefecture-level cities should follow the technology diffusion of big cities to facilitate the upgrading of traditional industries.