China's dualist model on technological catching up: a comparative perspective

Abstract

The central question of this paper is whether China can go beyond simple technological transfer and toward innovation in this age of globalization. By adopting an institutionalist perspective, this paper argues that China has developed a dualist model during its economic transitional period in which the foreign sector has been isolated from domestic firms, while the domestic industrial sectors have also failed to develop organic linkages among themselves to facilitate technological learning and generate innovation. This paper discusses four major institutional arrangements that deeply influence China's technological development – the institutional logic of economic reform, the state's industrial policy, the financial system and the industrial structure. It suggests that, owing to these institutional elements, China has neither developed economies of scale, as compared with the South Korean case, nor has it built up a network-type of economy similar to its Taiwanese counterpart in order to generate the mechanisms needed for technological innovation.