Technological catching up and innovation policies in China: What is behind this largely successful story?

Technological progress is critical for achieving sustainable growth and thus an important issue to study. China has recently emerged as a key power of innovation with both increasing investment in research and clear improvements in research output. The main questions behind these facts are how this country makes such achievements in a short period of time and whether they are sustainable in the future. This paper proposes a new theoretical framework to explain the phenomenally accelerated technological catching-up process of China. Specifically, we set up an inverted S-curve model based on the existing theories. The empirical analyses herein provide clear evidence supporting the proposed theoretical framework. At the aggregate level, an empirical model is developed for the purpose of identifying the main driving forces of the technological progress of China. Based on the theoretical framework and the existing literature, a seven-variable model is used to investigate the contribution of key factors to the innovation outcome of China. At the micro-level, case studies on China General Nuclear (CGN), a leading state-owned nuclear energy company, as well as Huawei, a prominent Chinese private company in the telecommunications industry, provide further insights into what firm-level strategies, in combination with or leveraging state-level policies, enable successful stories in practice.