Will China's quest for indigenous innovation succeed? Some lessons from nanotechnology

Over the past decade, the Chinese state has made major efforts to transition China's economy away from a focus on manufacturing, and towards a focus on generating indigenous innovation in R&D intensive fields such as nanotechnology. This goal has been pursued through a comprehensive industrial policy framework that aims to give preferential treatment to Chinese companies in domestic markets while also devoting significant resources towards basic and applied R&D, building science parks and research centers, funding focused venture capital funds, and recruiting prominent expatriate scientists and entrepreneurs from universities and businesses abroad. This paper, based on interviews with scientists, engineers, entrepreneurs, and venture capitalists in Shanghai, Suzhou, and Beijing, examines the strengths and weaknesses of China's push for indigenous innovation. We use the case of nanotechnology to address the pressing question of why China continues to underperform with regards to generating innovative, high-tech companies and products, despite heavy public R&D investment and the presence of one of the world's largest talent pools of potential scientists, engineers and entrepreneurs. (C) 2016 Elsevier Ltd. All rights reserved.