Shulin Gu
Published by Routledge and the UNU Press, 1999
ISBN 0-415-19741-4, 424 pages

Abstract
What will happen in mainland China in the next decade? Will it demonstrate the same technological dynamism as the smaller Asian tigers? What is going on in this giant economy in terms of innovation? Are there lessons to be learnt regarding the design of institutions and policies for other former planned economies and for developing countries?
Shulin Gu has written a path-breaking work on the Chinese innovation system that helps us answer these questions, so crucial for the global economy. Her book reflects her unique experience first as scientist and high level expert on science and technology policy in China and since 1992 as research fellow at UNU-INTECH in Maastricht.

The general theme of the book is the close interdependence between market reform and organisational change. It is convincingly demonstrated that market reform not combined with new organisation within technology institutes and with new organisational relationships with firms does more harm than good. It gives both the broader picture and very detailed information about how market change has interacted with organisational change in the case of China. Both successes and failures are registered and presented as steps in a process of policy learning at different levels of the innovation system.

The book is structured into three parts. The first part gives the overall review of reform policy in China with the emphasis on the period after 1985 moving up to the current period, the second analyses the process of spin-off of new firms emanating from R&D-institutions resulting in new technology enterprises mainly specialised in information technology and the third on how technology institutes in engineering have been successfully transformed into knowledge-based firms producing machinery products for the market.

The first part of the study shows the rapid transformation of Chinese policies in relation to its science and technology infrastructure. After a period of rehabilitation (the end of the seventies) re-establishing science and technology capabilities that became disorganised during the cultural revolution, the eighties, and especially the period after 1985, saw important shifts in policy strategy. First, there was a wave of merging institutes into existing firms, second came the period of spin-off where many new start-ups saw the light and, finally, technology institutes began to be transformed into corporations with a strong in-house engineering capability. Shulin Gu demonstrates how these different phases were accompanied by new regulatory regimes making the transformation possible.

The second part of the study is going into some detail regarding the second phase. It is demonstrated that the spin-off phenomenon has been a major prerequisite for the creation of a great number of New Technology Enterprises (NTEs) and for the formation of a computer and information technology industry. Especially interesting is it that some of the new capabilities created were in soft-ware rather than hard-ware (including the transformation of US soft-ware programmes into Chinese). The author concludes this part of her analysis by emphasising that for many developing countries facilitating spin-offs from public institutes may be one of the few ways to establish a dynamic interaction between the infrastructure and industry.

The third part is focused on the part of the technological infrastructure directed toward machinery. It is a diverse set of institutes and the way they are transformed into enterprises is also diverse. Some become specialised in engineering services while others become niche producers. Shulin Gu uses transaction cost analysis to explain the different patterns of transformation but her analysis also high-lights that the transformation is crises-ridden and costly and that basically it reflects a combined process of technological, institutional and policy learning. A general conclusion of great importance is that it is not enough to set up a new legal framework for the transformation to be successful. To facilitate the process of organisational change is a key to avoiding extreme costs of transformation.

The concept of national systems of innovation is a reasonably recent one developed in the last part of the eighties. The author's analysis of China is a major contribution to make this concept operational and to demonstrate its analytical potential. One major strength of the analysis is that, in spite of its systemic approach, it is always dynamic emphasising the complexity of change and learning. Shulin Gu's book on China deserves a wide audience among academics in innovation theory, development economics and economic history. Policy makers in charge of science and technology policy in all parts of the world will also have lessons to learn from how the technology infrastructure of the People's Republic of China has been radically transformed during just one decade.

Please order from the publisher