Technological diversification in China from 1986 to 2011: Evidence from patent data

This paper confirms the positive relationship between national technological size and technological diversification for China over three periods: from its premarket status 1986-1990, through its rapid marketization of 1991-2000, to its globalization phase from 2001 to 2011. The Chinese technological trajectory differs from the earlier developed world model significantly in tending to greater technological specialization from the outset of technological growth in the 1990s. We analyze a dataset of 3.7 million Chinese patents from the Chinese patent office. Using shift-share analysis, we decompose changes in the relationship between technological size and diversification into those attributable to the increase in size (number of patents, population, GDP) and those attributable to the structural shift towards diversification or specialization between technological fields. We find that although the positive relation between size and diversification holds over all three periods, there is a structural shift between each period towards greater technological specialization. We argue that this mirrors the 'globalizing' FDI-driven shift that occurred in the US and other developed countries towards technological specialization between 1965 and 1990. In China this represents a shift away from traditional fields such as consumer goods and equipment or transportation towards the electronics and computing fields. We place these long-run trends for China into the context of innovation policy and MNE behavior.