Growth Rates of State-owned and Private Enterprises in China and Their Innovation Strategies

Abstract

Based on Schumpeterian model, new models are constructed to analyse growth rates of SOEs, LPEs and SMEs and their innovation strategies. Average growth rates of each type firms are divided into two parts: (1) increase rates of each type firms’ scale; (2) technology-led growth rates. The order of average growth rates of each type firms is determined by whether their superiorities in some determinants of growth rates could prevail over their inferiorities in other determinants. And proportion in total production of firms with the highest growth rate increases over time, whilst proportion of firms with the lowest growth rate decreases over time. Proportion of firms with medium growth rate decreases over time if the difference between the highest growth rate and the medium growth rate is larger than the difference between the medium growth rate and the lowest growth rate. In terms of innovation strategy, at the early stage of development, imitating advanced technology from technology frontier is a better choice than undertaking R&D activities for each type firms. For one certain type firms, if the required least advantage in technology research capability to cover per unit of differences in technology gap can be satisfied, the imitation rate of this type firms is lower. In addition, if technology-led growth rates of each type firms are up to a certain level and innovation research capability could satisfy the lowest requirement, imitation rates will decrease in order to improve technology-led growth rates. Based on the model with endogenous step size of technology improvements, trends of preferences of imitating advanced technology is generally determined by technology gap and research labour.