By Yuan Dongming, Zhou Jianqi, MaShuping & Liao Bo

Research Report Vol.18 No.2, 2016

To promote innovative development of the national economy, China has, during the past few years, implemented a series of favorable policies for enterprise innovation, and created a social atmosphere with mass entrepreneurship and innovation. With guiding policies during the economic downturn, it is significant to have an objective evaluation of innovation input in different industries and whether Chinese enterprises have accelerated innovation, in order to design better innovation-supportive policies. To this end, we have carried out a two-dimensional evaluation of enterprise innovation input, based on R&D intensity and human capital input per capita of listed manufacturing enterprises. According to the results, these enterprises in China have paid increasing attention to R&D, with the general intensity from 2.23% in 2012 to 2.62% in 2014, but little attention to human capital input, a weakness in innovation input of Chinese enterprises.

I. Theories and Models of Evaluating Enterprise Innovation

There are, at home and abroad, two main methods to evaluate enterprise innovation, namely, output method and input one. Innovation output includescore technology, intellectual property rights, self-owned brands, business models and profits. Although they can reflect enterprise ability to innovate, it is difficult to obtain their data and some indicators cannot even be quantified. Innovation input mainly includes the input of capital, technology, human capital, and management, which, not necessarily related to the ability to innovate, show enterprise efforts to promote innovation. Generally speaking, the more efforts there are, the more successful innovation will be. In practice, the combination of output and input methods is used to evaluate a single enterprise, while the input method is common when evaluating innovation in a group of enterprises.

For manufacturing enterprises, the key to innovating lies in technological advancement, including product upgrading, quality and process improvement, etc. To realize technological advancement, internal R&D and introduction from the outside are needed, both of which require capital and talents. The former is mainly related to R&D input, which is direct and comparable in evaluating enterprise innovation. In fact, the total amount or intensity of R&D input is the only indicator of evaluating enterprise innovation around the globe. The indicator of talents is too complex to quantify, involving the number of employees engaged in innovation, the composition of trained personnel, enterprise input in talents, etc. “America’s Advanced Industries: What They Are, and Where They Are, and Why They Matter”, released by Brookings Institution in 2015, uses two indicators, R&D input and talents, the latter of which means the composition of trained personnel, namely the proportion of highly-educated employees. As listed manufacturing enterprises at home keep the talent structure to themselves, we adopt how much enterprises invest in employees, specifically, annual pay per capita, bonuses, allowances, subsidies, and social insurance, which are considered the intensity of human capital input per capita.

With R&D intensity and human capital input per capita as two coordinate axes, we can design a two-dimensional model with four areas, as shown in Figure 1. The area with much R&D and human capital input has strong innovation input, and so do enterprises in the area. The area with little R&D and human capital input has weak innovation input, so do enterprises in the area. Enterprises in the other two areas have much R&D input and human capital input respectively. For an enterprise group or industry, the more enterprises with strong innovation input there are, the more innovative the group or industry will be.

II. R&D and human capital input in Chinese listed manufacturing enterprises in the past three years

To evaluate the innovation advancement of listed manufacturing companies in China, we studied data of R&D and human capital input published by 1383 listed manufacturing enterprises[ ] for three consecutive years (2012―2014), accounting for 77.3% of the total number in China by the end of July 2015, involving 15 industries like textile, steel, automobile, pharmaceuticals, electronics manufacturing.

1. The growth and distribution of R&D input of listed enterprises

(1) R&D input of listed manufacturing enterprises rocketed, but at a slower growth rate. From 2012 to 2014, the annual total R&D input[] of the 1383 listed manufacturing enterprises was 134.05 billion yuan, 161.48 billion yuan and 182.45 billion yuan respectively, with an average annual growth rate of 16.7 percent, 4.3 percentage points higher than the national average. The intensity of R&D input rose steadily, from 2.23% in 2012 to 2.62% in 2014, 0.37 percentage points higher than the national level. Besides, R&D input per capita increased from 24,500 yuan to 29,800 yuan, an increase of some 22 percent.

With the slowing growth of income, R&D input of listed manufacturing enterprises increases at a much slower pace. In 2014, the revenue of listed manufacturing enterprises grew by 4.9 percent, nearly 6 percentage points down compared with 2013. What’s more, the growth rate of R&D input was sharply reduced, from 20.5% in 2013 to 13.0% in 2014, and nearly a quarter of enterprises cut R&D input (Table 1).

(2) Different sub-sectors vary in input intensity. In 2014, these sub-sectors can be divided into three categories in terms of R&D input. First, seven sub-sectors enjoyed a high growth rate, higher than the national level, including electrical machinery and equipment manufacturing, general equipment manufacturing, computer communications and other electronic equipment manufacturing, instrument manufacturing, auto industry, and rubber and plastic manufacturing, among which the auto industry enjoyed the highest growth rate of 26.7 percent. Second, four sectors had moderate growth rate, but lower than the national level, such as chemical raw materials and chemical manufacturing (including petrochemical and chemical fiber industry), non-metallic mineral product industry, food processing and manufacturing industry (including beverage manufacturing industry and agricultural by-product processing industry), textile and garment industry. Third, four industries had negative growth, including special equipment manufacturing, ferrous metal smelting, non-ferrous metal smelting, metal manufacturing , among which the last suffered from the biggest drop of growth rate, from 13.3% in 2013 to 12.3% in 2014 (Table 2).

Likewise, R&D intensity of these industries had similar changes. Compared with 2012, the indicator increased in 2014 in all these industries except chemical raw materials and chemical manufacturing industry, non-ferrous metal smelting industry, metal manufacturing industry, food processing and manufacturing industry, and textile and garment industry. Specifically speaking, computer communications and other electronic equipment manufacturing industry enjoyed the largest increase from 3.61% to 5.28%, while metal manufacturing industry dropped the most, from 2.48% to 2.26%. As for R&D intensity, ten industries exceeded the national level of 2.1% in 2014, with the instrument manufacturing industry had the highest number of 5.96%; while five industries were under the average level, such as chemical raw materials and chemical manufacturing industry, ferrous metal smelting industry, non-ferrous metal smelting industry, food processing and manufacturing industry and textile and garment industry, among which the food processing and manufacturing industry had the lowest level of only 0.90% (Table 3). ...

If you need the full text, please leave a message on the website.