Targeted Public Policies in Shanghai s Path to a Knowledge- Based Economy

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1 Targeted Public Policies in Shanghai s Path to a Knowledge- Based Economy Weiping Wu Associate Professor Urban Studies, Geography and Planning Virginia Commonwealth University December 2004

2 Research Focus and Content Primary purpose is to identify targeted public policies, at both national and municipal levels, that will allow Shanghai to compete and prosper in new knowledge-based economy Overview of related literature Recent changes in China s national innovation system Key policies and initiatives proposed and implemented in Shanghai Future challenges facing the city

3 Overview of Literature Pillars of a knowledge-based economy econ. and inst. regime that provides incentives for efficient knowledge use, knowledge creation, and entrepreneurship; educated and skilled workforce that can create and use knowledge; dynamic information infrastructure that can facilitate effective communication, dissemination, and processing of information; and effective innovation system that can tap into global knowledge, adapt it to local needs, and create new knowledge.

4 Overview of Literature Vitality of innovation shaped by national innovation system A complex network of agents, policies and institutions supporting the process of technical advance. This system, specifically, includes a nation s intellectual property (IP) protection system, its universities and its research laboratories. More broadly, it may also include many other subsystems and processes, such as norms of competition and a nation s financial and monetary policies. Two distinct models United States and Japan

5 Overview of Literature Local innovation capacity and support environment Universities are incubators for startup firms, as places where knowledge is patented, where specialized research is housed, and where scientists and industry work together on product commercialization. Investments in higher education infrastructure predict subsequent city and regional growth far better than investments in physical infrastructure. Critical role played by public policy in fostering a local innovation system.

6 China s National Innovation System Vertically integrated system prior to 1979 Research institutions under Chinese Academy of Science (CAS) and its subordinate, provincial-level academies, primarily responsible for basic research, research in key industrial areas and advanced technology. Research institutes within universities, with both teaching and research roles. Industry-specific research institutes within different ministries responsible solving specific applied problems as well as introducing new technology into industry.

7 China s National Innovation System Drastic reforms after 1979 Encourage closer relationship between research and production by breaking vertical coordinating functions and encouraging horizontal, market-based ties between research institutions/universities and enterprises. Nationwide R&D funding as percentage of GDP increased sharply, but remains focus on product or process development. Ministry of Science and Technology s 863 high technology R&D program and CAS Knowledge Innovation Program are particularly decisive in promoting higher levels of achievement in research.

8 China s National Innovation System Torch Program was begun in 1988 primarily to jump-start high-tech industrial development. Industrial enterprises now perform more than 60 percent of the nation s R&D. Research institutes are encouraged to launch commercial spin-offs and research staff is placed on contracts. Universities have assumed more active commercial roles over the past 15 years. Science parks allow R&D institutions and corporations to cooperate and interact by placing them in close proximity to each other.

9 Targeted Public Policies in Shanghai Building of Shanghai s municipal innovation system, which has included targeted public policies in five broad categories: nurturing R&D institutions increasing investment in R&D building a support infrastructure to facilitate commercialization of innovation developing an adequate regulatory and legal framework investing in human capital

10 Augmenting R&D institutions and human capital Encourage growth of private or non-state technological enterprises, through a broad array of incentives in financing, taxation, intellectual property protection, commercialization of innovation, and support services. A new effort to reform the university system and universities have now become the cradle for young research scientists. Annual enrollment for local students in higher education has been increased substantially. Research institutes, particularly those specializing in applied science and development, are beginning to develop some commercial linkages.

11 Creating support infrastructure A five-year key project has been launched to integrate all the circuits and pipelines for telecom services into an underground broadband pipeline. To appeal to foreign investment and high-tech business, several new science parks have been created. Development of high-tech industry is spearheaded by Zhangjiang Science Park. Established a network of service centers to facilitate commercialization of innovations, including a technology exchange center, a high-tech commercialization service center, a science and technology consulting service, and several hightech enterprise incubators.

12 Shanghai s Prospects and Challenges Legal system is still inadequate for supporting innovative activities and promoting inter-organizational linkages. Most generally, the problem arises from an incomplete system for assigning, exercising and protecting property rights. True venture investments or funds, particularly those with a pure focus on technology, are still rare. This is compounded by the drying out of public funding for research activities.

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