Create a pro-innovation environment

Updated: 2014-09-26 09:53

By Li Yang(

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Chinese government should create a pro-innovation environment by promoting competition, reforming funding mechanism for research and development works and protecting the intellectual property rights, says an article in the Excerpts:

China has hundreds of billionaires today. They have made their fortune in different sectors. Apart from real estate and manufacturing industry, companies thriving on the back of innovation in science and technology are now the cradle of new billionaire, especially Internet firms.

The new superrich, such as Ma Yun, Robin Li and Ma Huateng, all Internet tycoons, were born in 1960s and 1970s. They realized the advantages of the new combination of production factors and conditions. And there is no end to this combination.

Market and institutions of strong dominance can help companies increase their investment scale to imitate new technologies in the country with poor science and technology. Competitive market and institutions can boost the enterprises to choose more effective research and development path to innovate new technology, when the technology gap between the country and the developed countries is shrinking fast.

Promoting market competition and improving institutional environment can stimulate the enterprises’ innovative spirits. Performance-based payment system fit some simple work. For complicated R&D work, the payment system should pay more attention to the difference among the people’s technique, skill and knowledge.

The central government encourages the mixed ownership enterprises to let their key R&D employees hold shares to form an interest community in its plan of State-owned enterprise reform. This arrangement, if well implemented, can effectively motivate the researchers to focus on innovative works.

Moreover, the authorities should reform the current funding system for research in China. The fund should not be a monopoly of officials, but distributed and used more fairly according to the importance of research.

Private capital is another, if not more important, source of innovation, as the developed economies’ experience indicates. Venture investment, which is a key for small enterprises’ innovation, remains underdeveloped in China.

The government should also create the environment where different R&D entities can compete with other and the science and technology research achievement can be easily transformed into industry outputs. The R&D staff should also have the freedom to work for different institutions and enterprises.

China needs to implement the rule of law in intellectual property rights (IPR) protection. Without IPR protection, it is impossible to build an innovation-driven economy.

There is a lot of hot money in the market in China after the stock market and housing market cooled down. And there is a strong demand for R&D funds from various institutions, enterprises and individuals. To boost innovation, the government should bridge the gap between the two sides.