What Drives Regional Innovation Capacity Build-Up in China?

Building innovation capacity in China is critical to continuing economic development. This study adopts regional innovation system (RIS) and regional innovation capacity (RIC) approaches to investigate the relatively new phenomenon of RIC and identify key factors that explain variations in innovation capacity across regions of China. Our study empirically shows that the key drivers of RIC differ substantively between radical innovation and incremental innovation. Specifically, our findings suggest that innovation capacity is largely related to innovation inputs and these inputs tend to affect incremental innovation more than radical innovation in the context of China. The second finding is a relatively new phenomenon, which we explain using the continuum of CME-LME. Our study contributes to the literature on RIC in a transitional economic context and provides a number of implications for future studies on RIC. The findings also provide significant implications for government policymakers.