Innovation of manufacturing industries in the Pearl River Delta Region

Abstract

An innovation-driven economy is considered to be key in China achieving sustainable economic growth. The role of local governments in strengthening indigenous innovation capacity has aroused a great deal of scholarly attention. Academic debates are not focusing on the optimal degree of government intervention, but rather on the conditions that would make government intervention more effective. Little research has been done on manufacturing industries with lower technology intensity.

This dissertation aims to fill the research gap by exploring the conditions under which government intervention in the innovation policy domain can be effective for manufacturing industries in the Pearl River Delta region (the PRD region), which is known to be one of the world famous manufacturing bases. A mixed research approach is applied to this study. An enterprise questionnaire survey was conducted in Dongguan, Shunde, and Longang in the PRD region to identify the conjectured causal effects. Case studies of enterprises in the three areas for process tracing were applied to unveil the causal mechanisms implied in the quantitative findings.

This empirical research in the PRD region concluded with three major findings. First, a higher level of intensity of government-business interactions in different stages of the policy process can reinforce the positive impact of government support on motivating enterprises to innovate. The information flow between the local governments and local enterprises facilitates a mutual transformation of mindset and behavior of both agents, so that innovation policy can address the market failures, government failures, and systemic failures that enterprises need to overcome in the innovation process. Second, the effectiveness of innovation policy is also affected by the selection of policy instruments. As compared to financial instruments, information-based instruments are more effective in motivating enterprises to increase investment in innovation activities. Third, although local governments in the PRD region have not yet clearly engaged societal actors and policy stakeholders in the policy process and widely adopted information-based policy instruments, some local governments do better than others in these two aspects.

The findings suggest that the role of the local governments in the PRD region has been gradually transitioning to a new paradigm of local state developmentalism characterized by a lower level of government intervention and a new policymaking mode that allows for bottom-up feedback and suggestions. The findings also point to the variations of the role of the local state in the PRD region, at least in the innovation policy domain. Another major implication of this study is that information-based instruments deserve more attention from innovation policy researchers and practitioners.