Government Procurement and Indigenous Innovation

Topics: Independent agencies of the United States government, Federal government of the United States, Government Pages: 45 (12081 words) Published: October 12, 2013


Innovation and
the Visible Hand
China, Indigenous
Innovation, and the
Role of Government

Nathaniel Ahrens

procurement should
play an important
role in stimulating
innovation, but
maintaining open
markets and
international linkages
is critical.

Asia Program
Number 114   n   July 2010

© 2010 Carnegie Endowment for International Peace. All rights reserved. The Carnegie Endowment does not take institutional positions on public policy issues; the views represented here are the author’s own and do not necessarily reflect the views of the Endowment, its staff, or its trustees. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Carnegie Endowment. Please direct inquiries to:

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About the Author
Nathaniel Ahrens is a visiting scholar in the Carnegie Energy and Climate Program, where his research focuses on climate, energy, and sustainable development issues in China. He is the president of Golden Road Ventures Ltd., a business development and strategic advisory firm that provides expertise and support for critical projects in China, including sustainable development, government procurement, agriculture, and media. Previously, Ahrens was senior product manager and director of international sales for Intrinsic Technology, a Shanghai-based telecommunications software provider. He also founded Shanghai Pack Ltd., a luxury-brand packaging company based in Shanghai and Paris. Ahrens is a member of the National Committee on U.S.–China Relations, the Asia Society, and serves as an honorary ambassador for the State of Maine.




China’s Government Procurement
and Indigenous Innovation


Chinese National Indigenous Innovation Products


Why Innovate?


What Makes a Place Innovative?


Innovation and Open Markets


The Role of Government


The Role of Government Procurement
and the Case of the SBIR


The Effectiveness of China’s NIIP Program


Suggestions for China’s Government
Procurement With Regard to Innovation


The Legal Framework


Conclusion and Recommendations






Indigenous innovation1 has become the greatest immediate source of economic friction between the United States and China. This trend is not unique to these two countries; policy makers globally are actively trying to stimulate domestic innovation. The burgeoning markets for biotech and environmentrelated products and services and, potentially even more important, countries’ efforts to emerge from the global economic slowdown all reinforce this trend. Mindful of this global scene, China has made indigenous innovation one of the core elements of its attempt to make a structural shift up the industrial value chain.

Recently, however, indigenous innovation has been tarred with a protectionist brush. In both China and the United States, there have been increasing calls for buy-local stipulations and the erection of tariffs and non-tariff barriers to trade. In China, these measures primarily take the shape of government “local content” mandates and through the preferential treatment given to products officially classified as “national indigenous innovation products” (NIIP) in the government procurement process. In the United States, they have taken the form of buy-local provisions and efforts to shut out foreign companies. The conflict has been escalating dangerously. In the run-up to the recent Strategic and Economic Dialogue, the U.S. business community ranked indigenous innovation in China as its...

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