Finding Innovation in Dark Corners

“Global Technology Sourcing in China’s Integrated Circuit Design Industry: A Conceptual Framework and Preliminary Findings”
Dieter Ernst and Barry Naughton
East-West Center
August 2012

For nearly a decade, Chinese policy-makers have been on a seemingly Quixotic quest to turn the nation’s low-cost manufacturers into innovation-driven firms. The question that has plagued that effort from the start is whether Beijing’s “indigenous innovation” drive isn’t just a form of techno-protectionism, and if not, whether and how policy might actually aid in the emergence of world-class innovative firms.

That question remains largely unanswered, but Dieter Ernst and Berry Naughton have gone looking for answers in China’s integrated circuit design business. What the paper reveals is an example of how innovation is taking place outside the purview of government industrial policy, calling into question the value of centrally-driven strategic emerging industries.

A growing body of evidence suggests that the ship of state capitalism will founder on the rocks of innovation. The emergence of the new and the novel from overlooked quarters offers a reminder of the agrarian entrepreneurialim that emerged in 1980s China when Deng Xiaoping simply lifted the heavy hand of central planning. Ernst and Naughton’s study seems to points the nation toward a more productive approach to industrial innovation, yet one that would sorely test the natural interventionist urge of Party aparatchiks.

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