December 2013

IZA DP No. 7798: Intangible Knowledge Capital and Innovation in China

Belton M. Fleisher, William H. McGuire, Adam Nicholas Smith, Mi Zhou

published as 'Knowledge capital, innovation, and growth in China' in: Journal of Asian Economics, 2015, 39, 31-42.

Intangible knowledge capital (IKC) – technology produced by workers but not embodied in them – can offset the "middle income trap" as China exhausts the benefits of international technology transfer. IKC is productivity-enhancing among Chinese enterprises – more so in domestically owned than in foreign invested enterprises. Consistent with other research, we find that China's IKC generates patents in China, but fewer than in major industrialized economies. Among domestically owned enterprises, IKC growth has flowed more toward higher-tech, export-oriented industries, while among foreign invested enterprises, it has been oriented more toward domestic sales.