The paradox of decelerated technology importation and accelerated innovation in China: Insights from national technology development zones

Abstract

Although technology importation has traditionally been viewed as the main pathway for innovation catch-up in developing countries, a paradox has emerged in China following the 2008 financial crisis: innovation boom amidst a slowdown in technology importation. To unravel this paradox, using firm-level data, we delve into the promotional and distortive effect of National Technology Development Zones (NTZs) on innovation. We documented a promotional effect of NTZs on local firm innovation measured by both patent quantity and quality from 1995 to 2013, and observed a post-crisis distortive effect on patent quality. Drawing from technological learning theories, we further explored the underlying mechanisms—autonomous development and technology importation—which both contributed to the promotional effect. Concerning the distortive effect, both mechanisms are contributing factors, with technology importation having a more pronounced negative effect. Furthermore, creative capacity of autonomous development and tangible technology importation are more significantly associated with this negative impact compared to their counterparts (absorptive capacity and intangible technology importation). Our study sheds new light on the innovation progress of China against the backdrop of escalating technology protectionism.