Making of an innovative economy: a study of diversity of Chinese enterprise innovation

Purpose: This research examines the effects of firm ownership and size on innovation capability using data from the World Bank China Enterprise Survey (WBCES), which provides directly measurable innovation-related variables. Key consideration is given to the role and innovation capability of state-owned enterprises (SOEs) compared with domestic and foreign private enterprises in the Chinese economy. Design/methodology/approach: In its quest for technological self-reliance and a new developmental path, China is focusing on its enterprise innovation capability. Findings: The findings suggest that SOEs and domestic private enterprises are similar in terms of innovation participation but differ in terms of innovation diversification, which implies ownership-specific innovative advantages. In general, the authors find that SOEs are more innovative with respect to processes innovation but less so with respect to product, management and promotion innovations. Foreign-owned enterprises are superior in all types of innovation except product innovation. Research limitations/implications: The authors also find that size is an important determinant of innovation capability, with the effect varying depending on location and industry. Moreover, the joint effect of firm ownership and size on innovation declines with increasing size. These findings provide new insights into the evaluation of China's major policies. Originality/value: This research examines the effects of ownership and size on enterprise innovation capability, using the WBCES (2013) data, which include direct measurable innovation related variables.