Public Procurement as a Demand-side Innovation Policy in China - An Exploratory and Evaluative Study

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Public Procurement as a Demand-side Innovation Policy in China - An Exploratory and Evaluative Study

Yanchao Li

Doctor of Philosophy (PhD)

2013-11-27

Manchester Institute of Innovation Research

385

LIST OF CONTENTS .................................................................................................... 2 LIST OF FIGURES ........................................................................................................ 8 LIST OF TABLES .......................................................................................................... 9 ABSTRACT ................................................................................................................... 10 DECLARATION ........................................................................................................... 11 COPYRIGHT STATEMENT ...................................................................................... 11 ABBREVIATIONS ....................................................................................................... 12 ABOUT THE AUTHOR .............................................................................................. 14 ACKNOWLEDGEMENT ............................................................................................ 15 DEDICATED TO .......................................................................................................... 16CHAPTER 1: INTRODUCING THE THESIS.......................................................... 17 1.1 THE GLOBAL INTEREST IN PUBLIC PROCUREMENT TO DRIVE INNOVATION ............ 17 1.2 INNOVATION ORIENTED PUBLIC PROCUREMENT (IOPP) IN CHINA ........................ 18 1.3 GAPS, OBJECTIVES AND RESEARCH QUESTION ...................................................... 20 1.4 SCOPE OF THIS STUDY .......................................................................................... 22 1.5 THE RESEARCH APPROACH IN BRIEF ..................................................................... 22 1.6 THESIS STRUCTURE .............................................................................................. 23 CHAPTER 2: INNOVATION, POLICY, AND THE CONTEXT OF CHINA ...... 27 2.1 INTRODUCTION .................................................................................................... 27 2.2 INNOVATION SYSTEMS AND THE DEMAND ............................................................ 27 2.2.1 Innovation systems – actors, institutions, and interactions ........................ 27 2.2.2 The influence of demand on innovation ...................................................... 30 2.3 INNOVATION POLICIES .......................................................................................... 31 2.3.1 Justifying public interventions – market and system failures ..................... 32 2.3.2 Demand-side innovation policy (DSIP) instruments .................................. 33 2.3.3 ‘Policy mix’ as a conceptual tool for policy analysis ................................. 36 2.3.4 Evaluating IOPP policies – a gap............................................................... 38 2.3.5 Policy implementation – analytical considerations .................................... 40 2.4 CATCHING UP THROUGH INNOVATION .................................................................. 42 2.5 CHINA’S INNOVATION SYSTEM AND INNOVATION POLICIES .................................. 45 2.5.1 China’s innovation system in transition ..................................................... 45 2.5.2 Policies supporting ‘indigenous innovation’ .............................................. 46 2.5.3 Governance and implementation structure ................................................. 482.6 CONCLUSION ........................................................................................................ 52 CHAPTER 3: PUBLIC PROCUREMENT AND THE CONTEXT OF CHINA ... 54 3.1 INTRODUCTION..................................................................................................... 54 3.2 PUBLIC PROCUREMENT – ELEMENTS, PROCESSES, AND FUNCTIONS ...................... 54 3.3 REGULATING PUBLIC PROCUREMENT ................................................................... 58 3.3.1 Domestic regulations to realize multiple objectives ................................... 58 3.3.2 International regulations to promote free trade ......................................... 60 3.3.3 Policy space and development – current debates ....................................... 62 3.4 GOVERNMENT AND PUBLIC PROCUREMENT IN CHINA .......................................... 63 3.4.1 The two primary laws regulating procurement ........................................... 63 3.4.2 The fragmented picture of implementation ................................................. 67 3.5 CONCLUSION ........................................................................................................ 68 CHAPTER 4: INNOVATION ORIENTED PUBLIC PROCUREMENT (IOPP) . 70 4.1 INTRODUCTION..................................................................................................... 70 4.2 DEFINITIONAL AND BACKGROUND ISSUES ............................................................ 70 4.3 TYPOLOGIES AND FUNCTIONING MECHANISMS OF IOPP ...................................... 71 4.4 IOPP PRACTICES AND POLICIES IN OECD COUNTRIES ......................................... 75 4.4.1 Bottom-up IOPP cases ................................................................................ 75 4.4.2 Top-down policy initiatives ......................................................................... 77 4.5 ISSUES ASSOCIATED WITH IOPP IMPLEMENTATION .............................................. 79 4.6 CONCLUSION ........................................................................................................ 82 CHAPTER 5: CONCEPTUAL FRAMEWORK AND RESEARCH DESIGN ...... 83 5.1 INTRODUCTION..................................................................................................... 83 5.2 CONCEPTUALIZING IOPP – PROPOSING A FRAMEWORK ....................................... 84 5.3 ARTICULATING THE RESEARCH QUESTION ............................................................ 89 5.4 RESEARCH STRATEGY – A MULTILEVEL, EVALUATIVE CASE STUDY ..................... 90 5.4.1 Epistemological stances .............................................................................. 90 5.4.2 A multilevel evaluation framework ............................................................. 91 5.4.3 Case study – justification and design .......................................................... 94 5.5 RESEARCH OPERATIONALIZATION ........................................................................ 95 5.5.1 Data collection ............................................................................................ 95 5.5.2 Data analysis – overview of the approach and techniques ....................... 102 5.5.3 Ethical considerations ............................................................................... 103 5.6 VALIDITY ISSUES AND LIMITATIONS ................................................................... 103 5.7 CONCLUSION ...................................................................................................... 105CHAPTER 6: THE IOPP POLICY PROCESS ....................................................... 106 6.1 INTRODUCTION .................................................................................................. 106 6.2 THE EMERGENCE OF IOPP POLICIES ................................................................... 106 6.2.1 Procurement mandates in the MLP .......................................................... 106 6.2.2 Policy articulation following the MLP...................................................... 111 6.2.3 Identified IOPP policy channels ............................................................... 113 6.3 CHANNEL 1: IOGP MECHANISM BASED ON CATALOGUES .................................. 113 6.3.1 The national IOGP mechanism ................................................................. 113 6.3.2 Implementation at the national level ......................................................... 116 6.3.3 Implementation at the regional level ........................................................ 120 6.3.4 Termination of policies related to innovation catalogues ........................ 128 6.3.5 Highlights .................................................................................................. 132 6.4 CHANNEL 2: MAJOR TECHNOLOGICAL EQUIPMENT COMMERCIALIZATION .......... 133 6.4.1 The policy setup ........................................................................................ 133 6.4.2 Equipment catalogues and linkage with innovation catalogues ............... 134 6.4.3 Regional actions ........................................................................................ 137 6.4.4 Signalling and accrediting policies/catalogues for innovation ................ 138 6.5 CHANNEL 3: PROCUREMENT ELEMENTS IN DEMONSTRATION PROGRAMMES ...... 139 6.6 CONCLUSION ...................................................................................................... 140 CHAPTER 7: IOPP CASE STUDIES ...................................................................... 142 7.1 INTRODUCTION .................................................................................................. 142 7.2 CASE I: WATER RECYCLING SOLUTIONS ............................................................. 142 7.2.1 Overview ................................................................................................... 142 7.2.2 Background information ........................................................................... 143 7.2.3 The procurement process .......................................................................... 145 7.2.4 Obstacles ................................................................................................... 147 7.2.5 Outcomes and impacts .............................................................................. 147 7.3 CASE II: E-CLASSROOM SOLUTIONS ................................................................... 148 7.3.1 Overview ................................................................................................... 148 7.3.2 Background information ........................................................................... 148 7.3.3 The procurement process .......................................................................... 150 7.3.4 Obstacles ................................................................................................... 152 7.3.5 Outcomes and impacts .............................................................................. 153 7.4 CASE III: TUNNEL ENGINEERING ........................................................................ 154 7.4.1 Overview ................................................................................................... 1547.4.2 Background information ........................................................................... 154 7.4.3 The procurement process .......................................................................... 157 7.4.4 Obstacles ................................................................................................... 158 7.4.5 Outcomes and impacts .............................................................................. 159 7.5 CASE IV: OFFSHORE WIND TURBINES ................................................................. 160 7.5.1 Overview ................................................................................................... 160 7.5.2 Background information ........................................................................... 160 7.5.3 The procurement process .......................................................................... 162 7.5.4 Controversies surrounding Sinovel ........................................................... 164 7.5.5 Outcomes and impacts .............................................................................. 164 7.6 CASE V: PROCUREMENT ELEMENTS IN NEV PROGRAMME ................................. 166 7.6.1 Introduction ............................................................................................... 166 7.6.2 Background information ........................................................................... 166 7.6.3 Jinan – NEV procurement for the National Games 2009 ......................... 169 7.6.4 Shenzhen – NEV procurement for Universiade 2011 ............................... 172 7.6.5 Highlights: key issues identified ............................................................... 176 7.7 CASE VI: PROCUREMENT ELEMENTS IN LED LIGHTING PROGRAMME ................ 178 7.7.1 Introduction ............................................................................................... 178 7.7.2 Background information ........................................................................... 178 7.7.3 Weifang – an example of local integration? ............................................. 181 7.7.4 Yangzhou – transitioning from traditional industry ................................. 183 7.7.5 Shanghai – LED control system for tunnel lighting .................................. 185 7.7.6 Highlight: key issues identified ................................................................. 188 7.8 REVIEW OF THE CASES – A SUMMARY ................................................................ 190 7.9 CONCLUSION ...................................................................................................... 195 CHAPTER 8: SYNTHETIC ANALYSIS ................................................................. 197 8.1 INTRODUCTION................................................................................................... 197 8.2 CROSS-CASE ANALYSIS: DYNAMICS OF IMPLEMENTATION.................................. 197 8.2.1 Overview ................................................................................................... 197 8.2.2 Background information ........................................................................... 198 8.2.3 Procurement cycles and implementation mechanisms .............................. 202 8.2.4 Outcomes and impacts .............................................................................. 212 8.2.5 Obstacles (system failures) encountered ................................................... 215 8.2.6 The roles played by institutions ................................................................ 218 8.3 CROSS-LEVEL ANALYSIS: VERTICAL COHERENCE ............................................... 2248.3.1 Overview ................................................................................................... 224 8.3.2 Channel 1: IOGP mechanism based on catalogues.................................. 226 8.3.3 Channel 2: MTE commercialization ......................................................... 230 8.3.4 Channel 3: procurement elements in NEV and LED programmes ........... 234 8.4 CROSS-DOMAIN ANALYSIS: HORIZONTAL COHERENCE ....................................... 237 8.4.1 Interplay between IOPP policies and other policies ................................ 238 8.4.2 Lack of coherence with the domestic context ............................................ 239 8.4.3 Lack of coherence with the international context ..................................... 243 8.5 INSTITUTIONS AFFECTING IOPP ACTIVITIES – A CLASSIFICATION ...................... 248 8.6 COMPARING CHINA WITH OECD COUNTRIES .................................................... 249 8.6.1 Substantial differences existing ................................................................. 249 8.6.2 Signs of policy convergence ...................................................................... 251 8.7 CONCLUSION ...................................................................................................... 252 CHAPTER 9: CONCLUDING THE THESIS ......................................................... 255 9.1 REVIEW OF THE STUDY – APPROACH AND LIMITATIONS ..................................... 255 9.2 REVIEW OF KEY FINDINGS .................................................................................. 256 9.2.1 The contextual situation for IOPP in China ............................................. 256 9.2.2 The Chinese IOPP policy process ............................................................. 257 9.2.3 Stakeholders, interactions, and institutions .............................................. 258 9.2.4 Appropriateness of the three IOPP policy channels ................................. 259 9.3 CONTRIBUTIONS TO KNOWLEDGE ....................................................................... 261 9.3.1 Theoretical and conceptual contributions ................................................ 261 9.3.2 Empirical and practical contributions ...................................................... 262 9.4 IMPLICATIONS FOR POLICY AND PRACTICE ......................................................... 263 9.4.1 Reforming and tuning institutions ............................................................. 263 9.4.2 Strengthening actor capabilities ............................................................... 265 9.4.3 Interaction and intermediation ................................................................. 266 9.4.4 Policy differentiation and complementarity .............................................. 267 9.4.5 Globalization of IOPP – challenges and opportunities ............................ 268 9.5 FURTHER RESEARCH .......................................................................................... 269 REFERENCES ............................................................................................................ 271 APPENDICES ............................................................................................................. 310 APPENDIX 1: OVERVIEW OF CHINESE LITERATURE ON IOPP ..................................... 311 APPENDIX 2: NON-LINEAR INNOVATION PERSPECTIVES AND THE ROLE OF DEMAND .. 322 APPENDIX 3: EVOLUTION OF CHINA’S NATIONAL INNOVATION SYSTEM .................... 323 APPENDIX 4: DETAILS OF IOPP POLICY INITIATIVES BY OECD COUNTRIES ............... 327 APPENDIX 5: DETAILS OF DATA COLLECTION ............................................................. 333 APPENDIX 6: INFORMATION PAGE SENT OUT TO INTERVIEWEES ................................. 336 APPENDIX 7: PRE-INTERVIEW QUESTIONNAIRE .......................................................... 337 APPENDIX 8: UNSTRUCTURED INTERVIEWS – KEY ISSUES COVERED........................... 338 APPENDIX 9: SEMI-STRUCTURED INTERVIEW PROTOCOLS .......................................... 339 APPENDIX 10: SUMMARY OF INTERVIEWS .................................................................. 347 APPENDIX 11: INFORMATION OF NATIONAL-LEVEL POLICIES LISTED IN TABLE 6.1 .... 350 APPENDIX 12: REGIONAL IOGP POLICIES .................................................................. 351 APPENDIX 13: REGIONAL CATALOGUES OF INDIGENOUS INNOVATION PRODUCTS ...... 354 APPENDIX 14: REGIONAL IOGP CATALOGUES ........................................................... 356 APPENDIX 15: REGIONAL POLICIES RELATED TO MTE COMMERCIALIZATION ........... 357 APPENDIX 16: REGIONAL NOTICES ON TERMINATION OF IOPP POLICY CHANNEL 1 ... 358 APPENDIX 17: WATER RECYCLING CASE – OTHER DETAILS ....................................... 361 APPENDIX 18: E-CLASSROOM SOLUTIONS CASE – OTHER DETAILS ............................. 367 APPENDIX 19: TUNNEL ENGINEERING CASE – OTHER DETAILS ................................... 369 APPENDIX 20: OFFSHORE WIND TURBINES CASE – OTHER DETAILS ........................... 370 APPENDIX 21: NEV CASE – OTHER DETAILS ............................................................... 373 APPENDIX 22: LED CASE – OTHER DETAILS ............................................................... 381

There has been increased interest internationally in using public procurement as an innovation policy. China too has employed innovation oriented public procurement (IOPP) to implement its ‘indigenous innovation’ strategy. This thesis explores China’s IOPP policy processes, evaluates the appropriateness of these policies, and explains key issues identified.Literature strands on innovation, policy, public procurement, and IOPP are drawn upon to analyse IOPP and related policies. IOPP processes are conceptualized as dynamics shaped by the institutions, actors and interactions of innovation and public procurement systems. IOPP policies are framed as horizontal mixes of cross-domain interventions, and vertical mixes of goals, rationales, instruments, designed implementation structures, actual implementation processes, and outcomes. A criterion for evaluating policy appropriateness is coherence between the various dimensions. Macro-level policies impact on micro-level processes which in turn provide evidence of implementation. A multi-level case study methodology is adopted to link up macro/national, meso/regional and micro/local levels of policy design, articulation and implementation.Implementation is characterized through three IOPP policy channels, a channel being a characteristic group of policies to promote IOPP. Channel 1 employed ‘innovation catalogues’, which was unexpectedly terminated in 2011 in response to concerns from other countries over China’s perceived protectionist tendency. Channel 1 was found to be a centralized mechanism to implement general IOPP across all regions, sectors and levels of governance. As a one-size-fits-all approach requiring cross-domain, cross-level coordination, it failed to achieve coherence with the institutional fragmentation of China’s innovation and procurement systems. The other two channels were implicit, strategic IOPP approaches i.e. commercialization projects for ‘major technological equipment’ with a rationale of pre-commercial procurement (Channel 2), and demonstration programmes for emerging technologies with a rationale of creating lead markets (Channel 3). These two channels realized better coherence with China’s systems as both were targeted at specific sectors and levels. Cross-case analysis suggests that micro-level IOPP processes were more frequently shaped by local contexts of stakeholders, interactions and informal institutions rather than IOPP policies. Interventionist local governments and proactive suppliers played stronger roles than procurers in initiating IOPP. IOPP cycles followed diverse and informal pathways not always competition-based, which might have breached de jure procurement regulations but China’s weak formal institutions allowed this flexibility. Informal institutions sometimes mitigated flaws of formal ones and facilitated IOPP, but could easily play competing roles (notably regional protectionism) that hinder policy implementation.This thesis contributes to IOPP knowledge by: offering a conceptual approach to IOPP policy analysis concerning implementation and appropriateness evaluation; uncovering China’s IOPP dynamics based on which the understanding of IOPP as a research subject is deepened. Policy implications include lessons for catching-up countries emphasizing institutional capacity and government capability, and more general issues highlighting policy differentiation and complementarity, and intermediation.

• China
• Demand
• Innovation
• Policy
• Public Procurement

• Georghiou, Luke
• Rigby, John

• Ramlogan, Ronald

eng

• Li, Yanchao

• Manchester Business School
• Faculty of Humanities

uk-ac-man-scw:222567

Li, Yanchao

1st April, 2014, 13:41:39

Li, Yanchao

26th June, 2014, 18:40:51