Innovation, Patenting, and International Competitiveness: Empirical Evidence from China

As an integrated part of its overall economic reforms, China's innovation system is apparently becoming increasingly efficient. The orientation of research and development has shifted to activities more applied in nature as reflected in the patent data. Combining this with data measuring China's R&D inputs, we present evidence supporting the hypothesis that the patent production function is characterized by constant returns to scale. Moreover, accumulation of patents, which is the source of intertemporal technology spill-overs, contributes significantly to the creation of new knowledge. Technological capability as measured by the ratio of number of patents to the population of a region appears to correlated with enhanced international competitiveness of the non-state industrial sectors.