Innovation and growth in China and India Professor Sunil Mani Planning Commission Chair Professor in Development Economics Centre for Development Studies Trivandrum, Kerala, India Email : mani@cds.ac.in 1
Outline Part I: The Context Fastest growing economies in terms of efficiency of resource use ; Improvement in China and India s rank in the Global Innovation Index; Increasing knowledge-intensity of China and India s manufactured and service exports; Competitiveness in high technology areas such as space technology ; Part II Has China and India become more innovative since 1991? Input based indicators; and Output based indicators Part III: Some disquieting features of China and India s innovation system Quantity and quality of science and engineering personnel Conclusions 2 2
China and India are two of the fastest growing economies in terms of efficiency of resource use 3
Global Innovation Index Ranking [ Economist Intelligence Unit(2009)] 4
Technology content of China and India s manufactured exports, 1988-2007 (Percentage shares of manufactured exports) 5
Share of technology-intensive service exports in total service exports from India, 1999-2000 through 2007-08 6 6
China has become one of the largest exporter s of telecommunications equipments in the world 7
India has become the largest IT services exporter in the world (US $ billion) 8
China and India have become exporter s of capital (Values are in millions of US $) 9
Space competitiveness Index: Aggregate Scores by country, 2008 and 2009 10 10
Has China and India becoming more innovative? We seek to provide an answer to this by examining a variety of input and output indicators. The input indicator considered is the R&D expenditure data; A variety of conventional and not so conventional output indicators are used; The conventional indicators are a variety of patent indicators: we start with the US patenting record of Indian inventors. After analysing the trend in US patenting over time, we analyse the ownership of these patents in terms of three broad categories: domestic private sector enterprises, government research institutes and MNCs 11
Innovation indicators used Input indicators: (i) R&D expenditure data; Output indicators: (i) US Patents granted to Chinese and Indian inventors; and ( (ii) Number of triadic patents granted to Chinese and Indian inventors; 12 12
Input-based indicators Overall Gross Expenditure on R&D (GERD)- rate of increase in GERD during pre and post reform periods- GERD to GDP ratio; Sector of performance of GERD and changes in it- the growing importance of industrial sector; Growing privatisation of industrial R&D; Industry-wide distribution of industrial R&D; 13
Trends in China and India s overall investments in R&D, 1995-2006 14
Evolution of China and India s National System of Innovation 15
Business enterprise R&D expenditures in both China and India, 1999-2006 (Values are in billions of US $) 16
Result of two key Institutional reforms of public R&D Institutes in 1999 and 2000 17
China: Business Enterprises R&D expenditure has been rising 18
China: Much of the business enterprise R&D is self funded Sunil Mani, IDRC, May 5 2011 19
But are Business Enterprises really at the core of the Chinese NIS? However OECD (2008) remarks that it would be wrong to conclude that firms already form the backbone of the Chinese NIS; To a significant extent, the rapid increase in business sector R&D has resulted mechanically from the conversion of some public research institutes into business entities often without creating the conditions for them to become innovation oriented firms {From 1998 to the end of 2001 1149 GRIs were converted into business enterprises. The 204, 000 employees of which 1110000 S&T personnel transferred to the business sector were on an average older and less qualified than those who stayed in research institutions. 20
Nominal R&D expenditure by Indian private sector enterprises (Rs in Millions) 21
Average propensity to adapt in China and India s business enterprise sector, 1991-2002 22 22
Industry-wide R&D expenditures Sunil Mani, IDRC, May 5 2011 23
Relative technological specialisation of China and India From an analysis of the performance of R&D, Chinese NSI is to a largest extent driven by the SSI if the Electronics and telecommunications industries while that of India s by the SSI of the pharmaceutical industry. 24
Average cost of securing 1 US patent in terms of R&D investments (Millions of US $) 25
Trends in US patenting by Chinese and Indian Inventors (Number of patents) 26
Trends in US Patenting (continued) 27
Ownership of US Patents 28
Trends in the number of US patents granted to MNCs operating from India, Domestic private enterprises and CSIR, 1969-2007 29 29
Specialisation of Indian patenting in the US, 1980-2007 (percentage shares) 30
Domestic private sector enterprises active in patenting abroad 31
MNCs operating from India and active in patenting abroad 32
Triadic patents granted to Chinese and Indian Inventors 33
Trends in patenting within China and India 34
Technology-wide distribution of patents granted in India, 1999-2000 to 2006-07 35
Conclusions China and India are definitely on a higher economic growth path, and there is some evidence to show that innovations occurring in the two economies are having a positive effect in raising their resoective economic growth performance. There is evidence to show that innovative activities in the industrial sector in both the countries has shown some significant increases during the post reform process. Knowledge content of both domestic output and exports are increasing in both the countries. The Chinese NSI is dominated by the SSI of the electronics and telecommunications industries and in the case of India it is led by the SSI of the pharmaceutical industry In both the countries, increasingly much of the innovative activities are contributed by MNCs. In other words both China and India have become important locations for innovative activities There is even some macro evidence to show that the productivity of R&D investments in India is higher than in China, although this proposition requires careful empirical scrutiny before firm conclusions can be reached; 36 36
Conclusions (continued) However continued rise in innovative activity is limited by the of good quality scientists and engineers. Although the available supply appears to be very productive, its important that to sustain this on a long term basis and also to spread the innovation culture to other areas of the industrial establishment concerted efforts will have to be made to increase both the quantity and quality of scientific manpower. Fortunately the government is aware of this problem and has started initiating a number of steps towards easing the supply of technically trained personnel; 37 37