Restructuring China's Research Institutes: Impacts on China's Research Orientation and Productivity

This paper evaluates the impact of the Chinese government’s initiative begun in 1999 to restructure the country’s approximately 3,500 research institutes. The paper reviews the evolution of China’s research sector over the period 1995 to 2010, identifying certain issues that are analyzed using a panel of sample research institutes. The econometric analysis is based on a balanced sample of these institutes, both converted and unconverted, spanning 1998, the year prior to the restructuring initiative, to 2005. In order to control for potential endogeneity and selection bias, the paper employs various econometric methods to evaluate the impact of the restructuring program on the performance of these institutes. We find that the restructuring program appears to have achieved its fundamental goals, that is, shifting the relevant resources toward a more commercial mission for the converted S&T enterprises and a more researchoriented mission, involving the use of government grants, for the non-profit research institutes. The results show modest gains in the efficiency of patent production, but given the lengthy gestation period, a longer duration is needed to assess how the patent production of China’s research institutes will adapt to the shift in their missions and reassignment of government resources.