State Capacity and Innovation Policy Performance: A Comparative Study on Two Types of Innovation Projects in China

This study analyzes state capacity by comparing two types of innovation policies in China and estimating its impacts on policy performance. State capacity is defined as the extent to which the state can realize its objectives in policy and it is determined by government professionalism and penetration into industrial activities. Due to both the lack of channels to grasp information regarding complicated innovation processes and professional personnel capable of understanding such information, the state capacity demonstrated in these policies is low. The government relies more on indicators of innovation quantity rather than those of innovation quality as criteria for identifying innovation. This leads to poor policy performances in which grantees tend to meet only the qualitative requirements of the policies, namely increasing the number of patents, rather than engaging in genuine innovation and pursuing the essential objective of the policies. Therefore, even with market‐oriented reform, transitional economies like China still need to strengthen state building for achieving policy objectives.