Implication of the National Innovation System in China - Research Paper Example

Implication of National Innovation System s Submitted by s: Introduction By creating, impacting and applying knowledge, innovation has grown in leaps and bounds to assume the position of a vital driver of the economy’s growth and development and is also responsible for the changes that are taking part in the society today (Madanipour, 2011, p. 55)However, the attributes that define innovation have undergone a metamorphosis as a result of the globalization that is taking place which is driven by the advancements that are being made in the fields of information technology. Innovation is born when there are interactions at all the levels among the individuals and organizations and the governments usually have a major influence on the innovations via the finances that they avail and the developments of institutions of further learning that will impart the knowledge on the people. The governments then require an outline that covers the concepts and an experimental basis that will gauge if and how their contribution of the public policy to the total innovation of the nation could be made better than it is (Hertog, P., Remøe, S., & Organisation for Economic Co-operation and Development, 2001, p. 4). China has made advancements in a lot of things and competes with the US in a number of sectors and also in the military innovations in that they have developed new ways in which their military personnel will get ready and fight in a war so that they win it in a way that is modern. They have also made strides in the development of hardware and software technology for their organizations and also for the individual consumer in a world of innovation that can either be slow or fast and these innovations can happen at the same time or in a specified sequence (Cheung, 2013, p.188). The main features of the business environment in China China’s government made a histrionic move in its foreign and economic policy in 1978 and this changed the way that people looked at it from the business point of view making it become a profitable destination for multinational establishments that are from other countries outside China and the international business researchers (Kau & Marsh, 1993, p. 124). The Chinese government employed the use of the foreign direct investment in the 90’s with the intention of stimulating the rate of economic development and the achievement in the attracting the foreign business to start there is in contrast to the their own state owned enterprises that are in debt (Chen, 2011, p. 145). Even though all this that is going on is good for the investors, the unique characteristics of these environment and the implications that will come out of it are still hazy for many of the investors that want to invest there (Strange, 1998, p. 1). These unique characteristics that the business environment holds come up as the core reasons that make the people that are interested in business in China hold up the ideas that they have of dealers and suppliers. Even though the reforms in the market that are in China have been ongoing for more than twenty years, the market in China still has the attributes of a dual track System whereby the state controls the important market resources and has in its ownership the large firms and enterprises. How specific private companies fair can be manipulated by the many various specific policies and regulations that the government has at its disposal and this makes the market situation a bit unpredictable. This implies that for a company to get success and post positive growth, it may necessitate that the company gets favors from some quarters that are in the government agencies and departments that deal with the regulation of the type of business that the company is doing (Berger & Huntington, 2002, p. 24). New businesses in china have thus decided to rely on the support of the central state and the local state and the agents that deal with them and this kind of arrangement has developed to be called the “symbiotic clientelism” by Wank, (1999, p. 231) and also the networks that a person has and the relationships that come from their backgrounds are becoming vital in the quest for success in the business arena in China (Zhang, 2008, p. 12). The triumph of the Chinese capitalism that goes hand I hand with the communist environment that exists still makes the potential investors who want to invest in China approach the market with a lot of reservations to how the free market works. The situation where the state has the power to control the corporations that it owns and also those that are privately owned has developed a scenario that these organizations can tap into the resources that the institutions that are locally owned possesses so that they can beat the challenges that they face as they compete in the international market. This has worked to help the Chinese institutions to invest further in the international scene even in the resources that they don’t have such as minerals and oil since they get grants from the government that subsidizes this processes (Marinov, 2012, p. 43). Government component of the NIS to foster innovation It is important to keep in mind that governments and their different levels of organizations need to observe critically at the equilibrium between supporting the manufacturing industry to adopt higher technology and supporting ideas that are aimed at improving the innovation in a particular country. This energy that they have that is aimed at making the industries adopt innovative ideas should be directed to all the institutions without leaving out the ones that have low technology so that there is a balance. China has had great success in wooing foreign direct investing into its markets in the recent past and this trend seems like it will continue to be there as the trade and investment liberalization is very attractive to this investors. This continuous flow of the foreign direct investment has helped the country to upgrade the standards of technology in the industries that are in the country but has not played a big role in the improvement of the Chinese firms in terms of innovation. The direct foreign investment in China will need to be upgraded so that the country can get the profits that come from this to improve the innovations that should be taking place in their industries (Pigott & Organisation for Economic Co-operation and Development, 2002, p. 226). The OECD regulations for enterprises that are multinational (OECD) works towards the dissemination of the multinational enterprises and the benefits that arise from research and development that takes place in the different countries that thy operate in and this helps to increase the innovative ideas of the countries that play host to them (Organisation for Economic Co-operation and Development (2005, p. 68). China aims at making the technology standards that exist within its borders better and also transforming them into standards that are competitive worldwide and this will need the involvement of the people that are concerned with innovation to make sure that the process meets the international standards. China has a large land area and the market there is very dynamic which is characterized by technology that develops very fast and this puts the country in a favorable position to have great innovation. The public procurement can be used a means of developing innovation and speeding up the process that is involved in making the products of innovation familiar in the economy and this has been observed with the amount of government procurement progressively increasing though it has not reached the standards that have been reached bu other countries that have developed economies (Organisation for Economic Co-operation and Development, 2007, p. 20). The government of China in a deliberate move trades the access to the market by the multinational corporations for the technology that these corporations will bring into the country making the corporations have to share the technology so that they can be allowed to do business in the country (Gallagher & Zarsky, 2007, p. 112). This is a one of a kind strategy since china is a large economy and has the prospects that are needed by a country that can pull of such a strategy though some people suggest that the country needs a more comprehensive strategy that will be aimed at making the relationships with the multinational corporations even better so that they can be sure that they will bring innovation to their country. Other people argue that the import of foreign technology and the local innovations should be able to strike a good balance that will enable make huge improvements in the innovations that will arise from this (De & Cakir, 2011, p. 88). Finance component of the NIS China decided to allow foreign institutions to enter the its inter-banks market in the year 1997 as initially the multinationals were not into the business of borrowing funds from the banks and this was almost signaling the start of the Asian financial crisis. In the year 2003 several companies that came from the west were allowed to make their investment in the financial sector of China and this served as a gateway to the domestic market and also a supple foreign exchange arrangement that allowed the flow of capital. China thus allowed foreign companies to be able to trade in share in the country, treasury bonds and also the convertible bonds that was necessitated through special banks that were mandated to act as the custodians of these institutions (Neftci & Ménager-Xu, 2007, p. 101). China’s security market cannot easily be affected by the meltdown and thus it does not worry about having problems in this sector but the sector that may face problems is the housing sector if some of the people become bankrupt or are forced to sell the houses for one reason or the other. People often have questions whether the financial arrangements of China can be able to stimulate or maybe slow down the growth in the economy. This can be addressed by the Chinese banking that is very large and most of these large banks are owned by the state which makes it easy to stimulate the institutions that are in the market and therefore continue to grow the economy. There is also the growth of the stock exchange that has been on a steady and progressive rise since the year 1990 which has not been stimulating the economy enough but this will change soon since there is the rapid growth in the economy and this will make them play a bigger role and make them very important. Although China strives to improve its financial systems, it needs to develop a stable economy since this is very important in the progressive development of the economy of this country and when the financial systems are characterized by stability, it also means that the economy will be stable also. This means that the efforts that china is making to lower the amount of NPLs so that there can be more efficiency is vital so that banking crisis can be circumvented and the energy that is there in trying to regulate the environment that surrounds the financial markets will also help in this endeavor (Barth, Tatom & Yago, 2009, p. 67). The process of developing market mechanisms that are effective and an environment that will be favorable for institutions so that in the end technology can be commercialized is a vital one in China NIS and they have developed and adopted several measures that are aimed at boosting this strategy which include the backing that they give to spin offs that are started by research institutions and programs that cater for the growth of institutions that are involved with entrepreneurship not forgetting the SMEs. The country has more than fifty thee national science parks that play host to more than forty thousand firms that are rich in technology and at the same time they have one hundred provincial parks and more than four hundred technology incubators that are aimed at boosting this development of the highly technological industry. They have also developed a scheme that is aimed at assisting the technology field by availing to it loans for its development and tax rebates that are important in helping this industry further grow. Scientific and Technological institution In the 1980s China tried to develop several features that were aimed at making technology commercialized and they started by having funding programs that were supposed to assist the commercialization of outputs that came from scientific and technological ventures and ideas. There was also the introduction of competition in the institutions that were involved in science and technology and those that won the competitions were awarded a grant from the government as a form of motivation to do better and this considerably raised the standards in the country (Mian, S. A. 2011, p. 331). Industry component of the NIS The concept that China employs for its NIS involves linkages that are innovative and bind the vital actors, the institutions and also the ecosystems all at the same time and these include the innovative center and linchpin that’s linked to the military, the research institutions that are sponsored by the government that are comprised of knowledge innovation systems that encompass universities and colleges and also have the military and the civilians in it. The government regulates all this issues that will also include the regulation and the implementation of a regional innovation system which is supposed to encompass individual features that are advantageous (Cheung, 2014, p. 139). Conclusions The people that are the proponents of foreign direct investment say that report that this investment yields net economic benefits that are characterized by an inflow of capital and also technology and the development of an economic value for both the multinational corporation that is doing the investment and the country that hosts the multinational company. The critic on the other hand make an argument that this foreign direct investment is not beneficial to the host country at all since in the long run the multinational corporations are the only ones who will reap the benefits of this trade (Pearson, 1991, p. 9). China is a country that has a big land area and has a population on of over 1.3 billion people who can be looked at as potential consumers for products that can be exported to China or for those that will be produced there once an industry is set up (Xiao & Lin, 2009, p. 288). Furthermore China is now fronting an open market policy that seems to work in a good way that will continue to attract foreign investors since this makes the trading in the country much easier than it was before. References Berger, P. L., & Huntington, S. P. (2002). Many globalizations: Cultural diversity in the contemporary world. Oxford: Oxford University Press. Barth, J. R., Tatom, J. A., & Yago, G. (2009). Chinas emerging financial markets: Challenges and opportunities. New York: Springer. Chen, C. (2011). Foreign direct investment in China: Location determinants, investor differences and economic impacts. Cheltenham, UK: Edward Elgar. Cheung, T. M. (2013). Chinas emergence as a defense technological power. 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