Social Sciences in China (Chinese Edition)

No. 12, 2025

China’s Innovation Policy through the Lens of Technological Spillover

(Abstract)

Chen Binkai, Wu Nan and Dai Ruochen

The externalities arising from technological spillovers are among the most significant economic characteristics of innovation relative to other economic pursuits, yet they are frequently overlooked in both theoretical research and the practical design of innovation policies. Incorporating insights from production and innovation network methodologies brings technological spillovers more fully into economic analysis, improving both the theoretical completeness and practical relevance of research on the efficient allocation of R&D resources and on the design of optimal innovation policies. Research findings indicate clear and substantial technological spillovers across regional and industrial sectors in China. However, market-driven corporate decision-making often fails to account for these spillovers, leading to misallocated R&D investment. This provides a justification for policy intervention in innovation. Since 2010, the efficiency of China’s allocation of R&D resources has significantly improved, with innovation policy playing an important role. Going forward, China’s innovation policies should place greater emphasis on technological spillover effects and refine their mix of policy instruments to better harness the synergistic roles of an effective market and a proactive government.