University-Industry Linkages and Regional Absorptive Capacity - An Empirical Analysis of China's Manufacturing Industry

Stefan Brehm, Lund University
Nannan Lundin, Swedish Environmental Research Institute

Abstract

While technological progress in China’s manufacturing industry has been attributed mainly to spillover effects from foreign direct investments, empirical research has paid less attention to the role of the country’s growing indigenous innovation capabilities since the mid-1990s. With the Chinese government’s official objective of shifting from a resource-driven to a knowledge-based economy, science and technology policies push universities to assume a new role as entrepreneurs and to reconsider their traditional functions as teachers and researchers in light of commercial relevance. Based on panel data for China’s large and medium size corporations aggregated at the three-digit industry level between 1998 and 2004, we show that universities are becoming more integrated into regional systems of innovation. Spillover effects, however, vary among regions, sectors, and in relation to ownership structures, and depend on intramural R&D expenditures as a means to absorb external knowledge. Our results suggest that science and technology policies neglect institution building to facilitate comprehensive science-industry linkages and over-emphasize incentives for universities to provide public research as a private good.