The Path From Imitation To Innovation Research Experience

By virtue of its strong economic growth since Chinese reform and opening-up, the China's influence to the world expands rapidly in the past three decades. For some, this is a threat, for others it is a hope. Should be clear of we on these issues - what kind of growth path China's economic growth has taken; and for further growth, we should more continue to imitate foreign advanced technology and equipment to promote the country's technological progress, or turn to get efforts to improve the capability of independent innovation; as a developing country, whether the experience of rapid development of China's economy have a general sense; whether other developing countries can learn from Chinese experience to achieve the country's economic catch-up and so on - giving answers to .Neo-classical growth theory suggests that the process of economic growth is subjected to the law of diminishing marginal returns of capital, and achieves steady state ultimately. Given the rates of population growth and capital depreciation unchanged, new investment will dominate the growth rate of per capita capital and economy. Although the growth rate of per capita variables is zero at the steady-state of basic model, the extended model, which considers the possibility of learning by doing and the characteristics of knowledge that may be able to make up for diminishing marginal returns of capital, can realize the long-term growth of per capita output, even without any technological progress. Moreover, higher the level of investment (or a higher savings rate) will lead to a higher long-term per capita growth rate. Endogenous growth theory suggests that technological progress is a final factor to promote economic growth, and mainly derived from enterprises'or national R&D activities. Generally, it should be a positive correlation between technological progresses and R&D input divided by GDP. The more R&D input, the bigger rate of economic growth we can get.However, there are significant deficiencies in these two types of growth theory when they are used to analyze and interpret the path of China's growth, because their assumptions are not completely suitable for the development of the situation faced by Chinese. On the one hand, neo-classical theory of economic growth have not been fully taken into account the heterogeneity of capital investment, while annual increments of Chinese machinery and equipment are included in the existing capital stock compared with the more advanced technology, and embodied technical change may occupy the main forms of technological progress. On the other hand, endogenous growth theory applies to developed countries, which emphases R & D is the main form to promote technological progress, ignored the possibility that China can make use of imitation to achieve technological progress.At the beginning of its reform and opening up, China has a lower level of skills away from the world technological frontier. Different from endogenous growth theory, which emphasizes innovation as a major role in promoting technological progress, we have expanded the sources of technological progress and added imitation as another role to promote technological progress. Here, imitation and innovation is indifference as a means to achieve technological progress. The adoption of more advanced technology of foreign machinery and equipments, can play the same role as the innovation, and achieve rapid economic growth. We summarize the facts of China's economic growth, and there is a significant phase characteristics for equipment and R&D to promote economic growth. Based on those observations, we believe, if the Chinese economy could be successfully catch up with and surpass advanced world levels, the technological progress path would be following three stages: imitation phase, the transition from imitation to innovation phase and innovation phase. During imitation phase, the main form of technological progress is importing equipments embodied advanced technology. During innovation phase, the main form is independent input of R&D. Between the two phases is a transitional phase, where the two main forms converse.In the theoretical part of this article, we develop a hybrid neoclassical / endogenous growth model that both endogenous capital accumulation and endogenous technological progress in one model, to explain the evolution of the internal mechanism about the path of Chinese technological progress. Here, technological progress is no longer a given value exogenously, but a result of economic agents maximizing their profits. Emphasizing entrepreneurs'behavior in this article is our consistent microeconomic foundation. Even though capital accumulation played an important role, but eventually it is technological progress that realize economic growth. The entrepreneur has to decide to undertake either imitative or innovative activities, which subjected to the distance between the country's and the world technology technological level. When the country's distance is far away from frontier, it is more profitable for the entrepreneur to choose imitation. While closer to the technique frontier of the world, imitation becomes harder to succeed than innovation. For the developing countries, the entrepreneur needs to have a minimum technological level, where the costs of imitation are high enough, to carry out innovation. The level of costs of imitation rises as the economy moves closer to the technological frontier, enabling more entrepreneurs to be engaged in an innovation-based strategy, and consequently, moving the economy from a technological structure that is based on imitation of foreign technologies to one where domestic innovation dominates. At the same time, the analysis of the model shows that, when certain conditions are not met, the dynamic system will cause convergence during imitation stage, and the country will face a result of economic stagnation, which we call as imitation trap. Our analysis will apply to all developing countries with initial lower level of technology. For developing countries, our model about growth path can not only explain how to achieve catching up, but also be able to give the causes of stagnation.The comparative static analysis has obvious policy implications. The Government can twist the factors prices and devaluate its currency, to improve entrepreneur's profitability, which is highly effective help the country get out of economic stagnation and speed up the growth rate of catch-up country. Economic Growth Frontier Subject Team (2003) found that China's rapid growth benefits from low-cost competitive advantage, which is summed up as "low-cost industrial growth pattern". They believe "low-cost are the core facts to industrialize, which including low labor costs, low land prices and actual tax rate." The mathematical model of this article can be regarded as a continuation of the study shows that low-cost industrialization is optimal during the specific period.In addition, based on statistical and econometrical analysis with the national and inter-provincial panel data, we get the conclusion that the transition phase from imitation to innovation for China is coming. Hence the current problems to be faced by China's economic growth will be answered correspondingly. The influence of outward imitation and attracting foreign investment to promote economic growth will decline, and the contribution of independent R&D to economic growth will be increased significantly. To maintain long-term and stable economic growth, the government should gradually reduce the distortions, pricing of productive resources will gradually be returned to the market. To make such a policy change, it is the right time.