Conclusion

In this paper, we have sought to provide directions for developing the People's Republic of China's (PRC's) small and medium enterprises (SMEs), in the context of a national innovation system. To that end, we have introduced an analytical framework that draws on several distinct literatures, and have used the framework as the basis for strategic policy suggestions. We have also made an argument about why we believe that this approach allows for rapid industrial and technological catch-up, while avoiding as far as possible the PRC's current constraints, especially in terms of the financial sector.

The economic strategies that we suggest are by no means unique to the PRC's experience. In this sense, understanding SME development in another East Asian economy|Japan|may offer insights into policy approaches that may also prove to be viable for the PRC at this stage in its economic development.²⁰ Although these two economies are clearly distinct in terms of both their economic as well as political structures, Japan's historical progress toward a mature SME sector does suggest strategies that the PRC can adopt in its own development. In particular, Japan's decision to encourage joint partnership between SMEs and academic institutions, together with its innovative approaches toward SME financing, do echo somewhat our own discussion of these issues. A detailed comparative approach is something we leave for future research.

While we have offered much by way of economic policy, we wish to stress that our ideas build on the existing infrastructure that has already been pursued by the PRC's government. Given that the PRC has less of a technological legacy, we feel that such marginal changes are more productive than a wholesale reform of the national innovation system. In that sense, we are confident that our approach is consistent with the broader development strategies that are currently being made in Beijing. This political viability is important if the policies that we have outlined are to have any chance of implementation.

The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms..

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