the Visible Hand
Innovation, and the
Role of Government
play an important
role in stimulating
Number 114 n July 2010
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About the Author
Nathaniel Ahrens is a visiting scholar in the Carnegie Energy and Climate Program, where his research focuses on climate, energy, and sustainable development issues in China. He is the president of Golden Road Ventures Ltd., a business development and strategic advisory firm that provides expertise and support for critical projects in China, including sustainable development, government procurement, agriculture, and media. Previously, Ahrens was senior product manager and director of international sales for Intrinsic Technology, a Shanghai-based telecommunications software provider. He also founded Shanghai Pack Ltd., a luxury-brand packaging company based in Shanghai and Paris. Ahrens is a member of the National Committee on U.S.–China Relations, the Asia Society, and serves as an honorary ambassador for the State of Maine.
China’s Government Procurement
and Indigenous Innovation
Chinese National Indigenous Innovation Products
What Makes a Place Innovative?
Innovation and Open Markets
The Role of Government
The Role of Government Procurement
and the Case of the SBIR
The Effectiveness of China’s NIIP Program
Suggestions for China’s Government
Procurement With Regard to Innovation
The Legal Framework
Conclusion and Recommendations
Indigenous innovation1 has become the greatest immediate source of economic friction between the United States and China. This trend is not unique to these two countries; policy makers globally are actively trying to stimulate domestic innovation. The burgeoning markets for biotech and environmentrelated products and services and, potentially even more important, countries’ efforts to emerge from the global economic slowdown all reinforce this trend. Mindful of this global scene, China has made indigenous innovation one of the core elements of its attempt to make a structural shift up the industrial value chain.
Recently, however, indigenous innovation has been tarred with a protectionist brush. In both China and the United States, there have been increasing calls for buy-local stipulations and the erection of tariffs and non-tariff barriers to trade. In China, these measures primarily take the shape of government “local content” mandates and through the preferential treatment given to products officially classified as “national indigenous innovation products” (NIIP) in the government procurement process. In the United States, they have taken the form of buy-local provisions and efforts to shut out foreign companies. The conflict has been escalating dangerously. In the run-up to the recent Strategic and Economic Dialogue, the U.S. business community ranked indigenous innovation in China as its...
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