Notes
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[1]
OECD database (http://stats.oecd.org) accessed on 20.06.2012.
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[2]
“Torch Center is now working on the implementation of the Technology Transfer Promotion Activities to establish a national technology transfer mechanism which will help to create a technology innovation system with enterprises as the central player in partnership with research and educational organizations. The implementation of these activities will promote the dissemination and transfer of key industrial technologies, encourage and facilitate the establishment of regional technology transfer service alliances, ratify national technology transfer agencies at different levels, as well as the international technology transfer bases” (Torch High Technology Industry Development Center website accessed on 24.08.2013)(http://www.ctp.gov.cn/ctp-eng/areas_three.htm)
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[3]
Even if the Chinese government has begun to tackle environmental issues relatively late (since the 1970s), Chinese environmental regulations have accelerated since the 2000s, with several laws on atmospheric pollution, renewable energy and energy saving. As Huchet et al. (2008) highlighted, if we identify all the environmental initiatives China may be, amongst developing countries, the country which has made the most important efforts to decrease energy consumption.
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[4]
Energy Technology Information Network website, accessed on 22.08.2013 (http://www.etiea.cn/data/attachment/123(6).pdf)
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[5]
“The investment in research and development (R&D) will account for 2% of gross domestic product (GDP) in 2010 and 2.5% of GDP in 2020 (…). China has continuously increased the investment in science and technology since the implementation of reform and opening up more than two decades ago. However, compared with the developed countries and the emerging industrialized nations, the investment is still insufficient, the investment structure is not reasonable and the basic conditions for science and technology are still weak (…). The government should play a leading role in the increase of scientific investment. And the capability of the government to coordinate the scientific resources of the whole society should be strengthened through financial and taxation policies.” Chinese Government’s Official Web Portal (http://www.gov.cn/english/2006-02/09/content_183777.htm) accessed on 01.03.2013
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[6]
The terms “environmentally-friendly technologies”, “green technologies” as well as “environmentally sound technologies” are used indifferently to designate technologies the use of which saves natural resources and/or decreases pollutant emissions (GHG, ozone-depleting substances, land and marine pollution…). We retain the definition of the International Panel of Climate Change (IPCC), that is “technologies which protect the environment, are less polluting, use all resources in a more sustainable manner, recycle more of their wastes and products, handle residual wastes in a more acceptable manner than the technologies for which they were substitutes, and are compatible with nationally determined socio-economic, cultural and environmental priorities” (IPCC, 2000, p. 52).
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[7]
Accessed on 20.06.2012.
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[8]
Patents are classified by priority date and according to the inventor’s country of residence. Fractional accounts are applied to patents which have several inventors (OECD, 2009).
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[9]
Accessed on 20.06.2012.
1Since the accession of China to the World Trade Organization (WTO) in 2001, Japan has been one of its main trade partners: China is both Japan’s primary supplier, providing 22.1% of Japanese imports in 2010, and the main destination for Japanese exports, attracting 19.4% of these flows in the same year. Japan is also the fourth largest investor in China, and the first if we exclude tax havens and offshore financial centres (Hong Kong: 52.8% of inward Foreign Direct Investment (FDI) in China, the Virgin Islands: 9.11% and Singapore: 4.73%) and represented 3.6% of inward FDI in China in 2010. Finally, China is the second largest recipient of Japanese FDI outflows, attracting 12.7% in 2010, behind the United States, which was the recipient of 16.1% of these flows (OECD database [1]).
2The industrialisation of China has gone hand in hand with an increase in environmental damage: fossil fuel consumption, greenhouse gas (GHG) emissions, atmospheric, water and land pollutants have tarnished the country’s development and growth model. Since 2006, China has been the largest global emitter of GHG (24% of global carbon emissions in 2009 (IEA, 2011)) and the largest producer and consumer of ozone-depleting substances (OECD, 2007).
3This dual observation, first on the intensity of China-Japan bilateral exchanges, and second on environmental damage in China, and given the gap in development between them, leads us to hypothesise that their bilateral exchanges (economic flows) should have an environmental content. The multiplicity of channels of environmentally-friendly technology transfers complicates the empirical analysis. To overcome this difficulty, we have used patent data as a proxy for technological diffusion, as has often been done in recent empirical analysis (Johnstone et al.2009; Dechezlepretre, 2009; OECD, 2011a).
4In the first part, our analysis determines the technological prerequisites which are essential for the absorption of foreign technologies. The Chinese government, through improvements in the national system of innovation (NSI) and related legislation regarding inward FDI, favours the acquisition and appropriation of foreign technologies.
5In the second part, the mobilisation of two distinct methodologies to quantify environmental technology transfers from the Patstat database reveals that air pollution abatement technologies are transferred from Japan to China. To a lesser extent, the transfers are related to solar and wind energy technologies.
The Chinese context: a domestic environment necessary for technological absorption
6The technological capabilities of the recipient country can be interpreted as prerequisites for the acquisition of foreign technologies, favouring the absorption and adaptation of imported technologies to local economic needs. The first section focuses on improvements in the Chinese NSI, and on FDI regulations which guide technological diffusion. Then, in the second section, the analysis of research and development (R&D) gross expenditure, human resources allocated to R&D, as well as Chinese patent applications, enable us to determine China’s technological capabilities.
National system of innovation in China and FDI regulations: an incentive framework
7The scale of the process of technological diffusion is determined both by the domestic technological capabilities of the recipient country, and by the level of sophistication of the NSI (MacDonald, 1992; Nurbel et al., 2008; OECD, 1997).
8Domestic technological activities can be analysed as prerequisites in order to adapt to, and replicate, imported technologies. Since the early 1990s, academic research on environmental technologies transfers has highlighted the importance of domestic technological capabilities (Zunsheng Yin, 1992). “Over the long term, useful transfer requires development of an indigenous capacity for technological adaptation, replication and innovation by the receiving country. Thus, technology transfers cover a host of activities, commercial and other, involving the international flow of technological research, knowledge, training, studies, processes and equipment. These activities cut a wide swathe through foreign trade, international economic assistance, and global environmental protection” (MacDonald, 1992, p. 11).
9Moreover, the nature and organisation of the NSI are crucial, both to the efficiency of innovation and technological absorption (Freeman, 1987; Metcalfe et al., 2008). Public policies on R&D, university-private sector linkages and public research institutes are key components of a country’s innovation capabilities and technological upgrading. According to Laperche et al. (2007, p. 70), an NSI can be defined by the set of public and private institutions (companies, public and private research institutes) which are key performers in the innovation system, and which are exchanging informational and financial flows. The complexity of the NSI and the multiplicity of relations between these actors complicate analysis of this system: this concept encompasses the main sectors which have innovation activities, as well as relations between them. The coherence of the system is explained by the adequacy between innovation (basic or applied research) and the requirements of the private actors, by the rules and legislation which regulate R&D, and the financial and informational interactions between each part of the system.
10Since the 1980s, China has implemented a set of reforms affecting each part of the NSI, to improve the autonomy of the actors and their efficiency. These reforms produced a transition from a planned system segmented by type of activities (R&D undertaken by research institutes, implementation by factories, multicentric decision-making process) to a more autonomous system, in terms of decision-making process and allocation of funding (Liu et al., 2001). A second wave of reforms (1985-1992) focused on science and technology systems and was aimed at favouring informational relations between public research institutes, universities and the business sector. From 1992 to 1999, priority was given to basic research, with more autonomy in the allocation of public funds. In this period, reforms formalised relations between the actors and produced more transparency and coherence in the legal framework (Lundvall et al., 2006). The last step (1999-) was aimed at developing public-private partnerships to improve the commercialisation of innovations.
11This set of reforms of the NSI attempted to increase the efficiency of public research institutes through organisational reforms (downsizing and the reorientation of public funds towards basic and applied research) (Tang, 2010). These reforms have created more incentives for research institutes to adapt their activities to users’ and producers’ needs, while public funding declined and research institutes diversified their sources of funding. According to Liu et al. (2001), since 2000 the vast majority of research institutes do not receive automatic public financial support; the relevant authorities grant subsidies on a competitive basis. The Chinese government also gives priority to the higher education sector, concentrating financial support on key research-intensive universities. A distinctive feature of the Chinese NSI is the implementation of university spin-off ventures, which contribute directly to innovation capabilities and the stock of skilled manpower (Hu et al., 2008).
12At the same time, institutions and programmes have been implemented in order to support and foster domestic innovation in China. The Key Technology R&D Program (1982) and the National High-Tech R&D Program (863 Program (1986)) promote technical upgrading and concentrate resources on key technologies (innovative industrial and environmental technologies) to improve the international competitiveness of strategic industries (Tang, 2008). The Torch Program (1988) is the most important programme for high-tech industries and seeks to develop innovation clusters, encouraging spin-off enterprises (New Technology Enterprises) from R&D institutes and universities (Lundvall et al., 2006; Gu et al., 2008). These interactions foster the growth of tech-based small and medium enterprises and boost domestic innovation. It includes the organisation of high-tech development projects and the establishment of high-tech industrial development zones – science parks – which favour the upgrading of industrial clusters to innovation clusters. In that regard, the Science & Technology Industrial Parks (STIPs) – the first of their kind created in Beijing, 1988 (Zhongguancun Science Park) – favour technology transfers [2] and business research cooperation. Under the authority of the State Council, the 973 Program (1998) is also a key national programme which supports basic scientific research activities on a project basis, in strategic fields such as information technologies and biotechnologies.
13China is pursuing a strategy of technological upgrading. The Medium and Long-term Science and Technology Plan (2006-2020), issued in 2006, reflects this ambition of strengthening the innovation system, and sets eight major objectives to be reached from 2020, together with, among others, the development of key energy-saving and clean-up technologies. The Plan points out the need to increase investment in basic research, and to foster the international development of research institutions, universities and private R&D institutes. This Plan explicitly designates environmental technologies as an answer to growing energy issues, and creates fiscal incentives to boost innovation activities. [3] Each part of the NSI is mobilised to reach these objectives: the strengthening of private innovation in small and medium enterprises, the designation of financial incentives to guide activities, and the extension of science parks (Gu et al., 2008). This Plan targets three global objectives by 2020: gross expenditure on R&D should rise to 2.5% of gross domestic product (GDP), the science and technology contribution to GDP should reach 60%, and reliance on foreign imported technology should be reduced to 30% or below [4].
14Moreover, to maximise spillovers of foreign flows and technology transfers, the Chinese government has implemented laws which guide FDI. FDI was first limited to joint ventures between foreign companies and domestic entities, which were mainly public enterprises (OECD, 2004). These joint ventures have two forms: equity joint ventures and contractual joint ventures. The latter are mixed-capital companies in which the foreign partner must represent at least 25% (Lemoine et al., 2003). If the share of the foreign investor does not reach this threshold, it does not benefit from a tax rebate on capital goods imports and other tax exemptions available for foreign invested companies. The joint ventures must also provide technological and organisational training and pursue some economic activities which favour technological upgrading (Zhao et al., 2008). The law governing wholly foreign-owned enterprises was implemented in April 1986. Foreign-invested companies were required to adopt advanced technologies to develop new products, to save energy and natural resources, to improve existing products and/or to replace imported products, or to export 50% of production (OECD, 2004).
15Chinese policies dealing with FDI have three objectives: first, boosting the economic development of eastern regions, second, promoting new exporting industries, and third, creating domestic production capabilities in high-tech sectors enabling import-substitution (Lemoine, 1996). The Chinese government has implemented special economic zones to welcome high-tech activities: Special Economic Zones (ZES) and Economic and Technological Development Zones (ETDZ). In the ETDZ, FDI have been encouraged in ten fields, with a priority on the development of environmentally-friendly technologies: FDI are encouraged if they lead to the transfer of new technologies and new capital goods allowing for the use of new renewable resources and the management of atmospheric pollution.
16Chinese industrial policy promotes technology transfers and the concentration of foreign capital on economic zones, in order to favour cluster effects and spillovers. Moreover, the creation in 1995 of special legislation on FDI reflects the will to include western and central regions in economic development. Three categories of investment (encouraged, restricted, prohibited) have been defined according to the technologies used, the export capabilities, the geographical areas, the degree of competition with domestic industries or according to some environmental issues. The Catalogue for the Guidance of Foreign Investment Industries specifies that projects in encouraged sectors benefit from income tax reductions and value-added tax reductions; investors can import capital goods without being subject to the standard customs system and access to borrowing facilities. Investments are encouraged by the government if they trigger the use of new agricultural technologies, efficient technologies, if they supply/use energy in a sustainable approach, or when these investments can contribute to reducing atmospheric, land and water pollution and reducing the negative externalities of industrial activities (Ministry of Commerce of the People’s Republic of China, 2007).
17To sum up, the reforms of the Chinese NSI aim at improving domestic innovation capabilities, and the legislation on FDI favours technology transfers. The efficiency of the NSI is a factor facilitating technology transfers from foreign invested enterprises and the absorption capabilities of new technologies.
Quantitative indicators: a technological environment in China favouring the acquisition of foreign technologies
18Two different indicators can be used to measure a country’s innovation and technological performance: inputs of the innovation process and outputs of these activities. Inputs encompass R&D personnel, gross domestic expenditure on R&D and high-tech industry expenditure on R&D. Innovation output can be measured through the number of patented innovations (OECD, 2011b). Chinese technological performances will be compared to those of Japan, as this country is Asia’s technological leader (Meyer, 2011). First, our analysis of R&D activities points out Japan’s special status of technological leader, even if Chinese R&D expenditure is growing significantly. Second, our analysis focuses on Chinese and Japanese patent applications in all technological fields and then in environmental technologies, revealing the complementarities of these two countries.
R&D activities: indications on innovation inputs
19China is pursuing a strategy of technological catch-up. Beyond the imports of advanced technologies from developed countries, China seeks to build a competitive innovation system (Cannady, 2009). These prospects appear in the current National Medium and Long-term Program for Scientific and Technological Development (2006-2020) which targets an increase in research intensity to 2.5% of GDP by 2020 [5]. Figure 1 illustrates the evolution of Chinese technological performance since 1997. Technological intensity (gross domestic expenditure in R&D in the GDP) increased from 0.64% in 1997 to 1.34% in 2005. It attained 1.48% of GDP in 2008. China has the objective to increase this rate to a level similar to those of developed countries, and these expenses may rise significantly in the coming years. As for Japan, R&D intensity reached 3.44% of GDP in 2008, which is one point higher than the level in the USA.
Gross domestic expenditure on R&D (in % of GDP)
Gross domestic expenditure on R&D (in % of GDP)
2029.4% of R&D gross expenditure is realised by five high-tech industries: aircraft and spacecraft industries (R&D expenditure represented 13.82% of the value added in 2006), electronic and telecommunication equipment industries (5.41%), computers and office equipment (3.45%), pharmaceutical industries (2.91%), and medical equipment industries (2.67%) (MOST, 2007). Even if environmental industries have lower R&D output, the government has implemented several plans to increase it (e.g. the Guidance Catalogue of Renewable Energy Industry (2006) and the Medium to Long-Term Plan for Renewable Energy Development in China (2007-2020)). China is one of the world leaders in the production of solar photovoltaic (PV) panels, with 57% of global output in 2011 (EuroObserv’Er, 2012). Domestic firms are more competitive in the midstream and downstream industry chain (production of modules and cells) and depend on foreign technologies for the upstream part, which is characterised by strong barriers to entry (De La Tour et al., 2010). As Wu et al. (2012) highlight, even if China’s patenting activities in the PV industry are relatively low compared to other emerging countries (e.g. Korea and Taiwan), China has started to build its own internal technological capabilities in response to the growing demand for solar PV, with a rapid shift from imitation to innovation. Most of the knowledge flows to China for solar technologies come from Japan and the US, and the public sector has been an essential driver for the absorption of these foreign technologies. The situation of the wind sector is quite similar, with three Chinese manufacturers accounting for a 44% share of the annual market in 2012. This rapid growth has been favoured by strong regulatory and financial support from the government, such as a 70% “domestically produced content” requirement for all installed projects (GWEC, 2012). This legislation has encouraged foreign firms to establish joint ventures with domestic industries, favouring the spread of specific technologies.
21Moreover, the China Science & Technology Statistics Data Book (2007) provides additional information on the nature of R&D activities: 78% of Chinese research expenditure (public research institutes, private and public sectors) is allocated to experimental development activities in order to devise new products, methods and services. Basic research activities are marginal; they represent only 5.2% of this funding in 2007. This share reached 13.3% in Japan in 2003, and 18.7% in USA in 2004 (MOST, 2007). Even if China possesses important financial resources allocated to technological research, human resources in this field remain low because of China’s weak human capital resources (Lemoine et al., 2007). In 2008, the number of researchers and R&D personnel reached respectively only 2.1 and 2.9 per thousand total employment in China, against 10.2 and 13.9 in Japan (OECD, 2011b).
22R&D activities may impact the quality of the environment through a set of direct and indirect effects. Fisher-Vanden et al. (2010) have concluded that technological development affects energy use and carbon emissions in several ways. The overall effect depends on the energy efficiency of innovative firms. The incorporation of new technologies in production processes modifies both the factorial and energy intensities of production processes. If these technologies have an energy efficiency superior to the local substitutes, their use will decrease the energy consumed during production (for a constant output). R&D activities also lead to increased global income. Nevertheless, without a modification of production techniques, this “income effect” risks affecting energy consumption and carbon emissions. Fisher-Vanden et al. (2010), through an empirical analysis of the environmental impact of R&D in China, have concluded that these activities lead to an increase in energy consumption.
23Energy production in China mainly originates from coal combustion and the increase in energy consumption will contribute to pollutant emissions. However, this effect depends on the types of innovations developed. If they can be qualified as “eco-innovations” or “environmentally-friendly technologies [6]”, their development can decrease energy dependence on coal combustion.
24Foreign firms also impact domestic innovation in China. Fu (2008) has analysed the impact of inward FDI on the development of regional innovation capabilities in China, using R&D intensity and labour force quality (percentage of population with 15 years schooling) as proxies for absorptive capabilities. It appears that FDI can contribute to regional innovation capabilities. Moreover, the strength of this effect depends on the level of sophistication of foreign investments, and the presence of innovation-complementary assets in the region welcoming this investment. As the author points out, the effect of foreign investments on local innovation depends on absorptive capabilities. The more sophisticated the linkage between domestic and foreign activities is, the stronger the spillovers of these FDI will be. The differences in technological capabilities between eastern and central regions in China explain why they attract different types of FDI (the asset-seeking type FDI versus the labour-intensive processing type FDI). Therefore the poorest regions which do not have appropriate absorptive capabilities and technological bases cannot improve their innovation capabilities thanks to FDI. As Hu et al. (2008) point out, foreign ventures have the highest level of innovative efficiency, ahead of public research institutes and universities, reflecting the important role of foreign technologies in China’s technological upgrading.
Patent publications: indications on innovation outputs
25If we look at all the technological fields, the number of patent applications under the Patent Co-operation Treaty (PCT) increased from 2,787 in 1980 to 161,309 in 2010. On that date, Japan was contributing to 21.9% of worldwide applications, behind the United States (25.5%) but ahead of Germany (10.6%); these three countries representing more than 57% of worldwide patent applications under the PCT. The number of Chinese patents is significantly inferior, but its applications have increased strongly since 1980, with the implementation of R&D policies. In 2010, Chinese patent applications under the PCT represented 8.4% of global applications, against only 0.05% in 1990 (OECD database [7]).
26In order to focus the analysis on environmental innovations, we have used the classification carried out by the OECD Work Group on Environmental Policy and Technological Innovation (EPTI) to identify environmental International Patent Classification (IPC) codes. This classification enables us to identify innovations which reduce GHG emissions, improve energy efficiency and clean up the environment.
27The Kyoto Protocol (1997) is one of the explanations for the increase in green patents, especially of technologies specific to mitigating climate change (the number of patents under the PCT in this field increased 33-fold between 1990 and 2008). The second most dynamic sector in terms of environmental innovations is energy production from renewable resources (the number of patents increased 20-fold between 1990 and 2008). The growth rate of environmental innovations is more significant than that of all technological fields combined.
28This analysis of environmental innovation activities in China and Japan raises three major points. First, even if they are far inferior in absolute value, the number of environmental patent applications by Chinese inventors has been growing fast since 1990, from 0.5 in 1991 to 125 in 2009 [8]. The growth of patents represented in figure 2, expressed in the growth index (base 1 in 1990), shows that Chinese patent numbers in the environmental field increased faster than patent numbers registered in all technological fields combined.
Growth in patent applications (environmental and all technological fields) in Japan and China (1990-2008)
Growth in patent applications (environmental and all technological fields) in Japan and China (1990-2008)
Note : Environmental patents are designated according to the OECD classification (http://www.oecd.org/env/consumption-innovation/indicator.htm accessed on 07.03.2013).29Second, Japan plays an active part in the field of environmental innovation: environmental patent applications represent 10.61% of all Japanese patent applications registered in 2008; this rate is higher than the rate calculated at global level, which reached 7.57% in that year. More precisely, in 2008, 26.56% of Japanese environmental innovations were technologies which have a potential for mitigating emissions, with more than half (58.63%) concerning energy storage.
30Third, even if China is significantly less active in environmental innovation (which represented 4.4% of all Chinese patent applications in 2008), its R&D efforts are focused on two kinds of environmental innovation: on the one hand, water pollution abatement (category “general environmental management”), and on the other hand, energy generation from renewable and non-fossil sources. Figures 3 and 4 present a disaggregation of Chinese patents in these two categories. In the renewable energy category, innovations are focused on the development of solar photovoltaic energy (30.35%) and wind energy (19.80%).
Chinese patent applications in the category “general environmental management” in 2008, divided into technologies
Chinese patent applications in the category “general environmental management” in 2008, divided into technologies
Chinese patent applications in the category “energy generation from renewable and non-fossil sources” in 2008, divided into technologies
Chinese patent applications in the category “energy generation from renewable and non-fossil sources” in 2008, divided into technologies
31After this first descriptive approach, it appears that since the middle of the 1990s, the Chinese government have allocated an increasing amount of resources to R&D activities, in order to reach the level of technological intensity of industrialised countries. Even if these human and financial resources remain inferior to those of Japan, environmental innovations are the most dynamic sector. The increase in environmental patents in China reveals the market perspectives for the commercialisation of these technologies, as well as the authorities’ concerns for environmental protection. Chinese R&D activities and patent applications represent some technological prerequisites for the absorption of foreign technologies.
Empirical analysis of technology transfers using patent data
32This second part measures technology transfers from Japan to China using patent data. First we present the two methodologies used. Second, our results reveal that the technologies transferred are mainly clean-up technologies (air pollution abatement) and, to a lesser extent, renewable energy technologies (solar and wind energies).
Methodologies
33Technology transfers from Japan to China are difficult to assess. The use of patent data narrows the analytical framework: we only consider the output of the innovation process in Japan, and only environmental technologies which are protected by intellectual property rights. In other words, only environmental technologies which are innovative and patented can be captured by this methodology.
34However, patent data have been used as indicators of environmentally-friendly technology transfers in major empirical studies (Dechezlepretre, 2009; Haš?i? et al., 2010; Johnstone et al., 2009; OECD, 2011a; EPO, 2010), and the completeness of patent databases allows a precise empirical analysis.
35Using the information in the PATSTAT database, the OECD has found that major technology transfers occur between developed countries (which are designated as Annex B countries of the Kyoto Protocol) (Johnstone et al., 2009; 2011). In the case of North-South transfers, empirical studies show that Japan is the main supplier of environmental technologies to China, accounting for 32% of all duplicate patent applications received by the Chinese authorities (1988-2007). Furthermore, the analysis shows that solar photovoltaic technologies predominate (79% of duplicate patent applications), with Japan as the largest global supplier and China the main recipient country (Haš?i? et al., 2010). This result can be explained by the position of China as the highest global producer of photovoltaic solar panels: foreign companies based in China extend the protection of their invention to reduce imitation risks. As mentioned earlier, Chinese domestic companies are more competitive in the midstream and downstream parts of the industry chain. Nonetheless, they still rely on foreign technologies for the upstream part, which requires more investment and technological capabilities.
36To complete these results, we used the global patent database PATSTAT, produced by the European Patent Organisation (EPO). This database has worldwide coverage, regrouping data issued by 80 national patent offices and containing more than 63 million patent applications in all technological fields.
37The use of this data presents several advantages as it can be considered to be an appropriate proxy of innovation activities, and is used to evaluate international technology diffusion (Dernis et al., 2001; OECD, 2008; Oltra et al., 2009). There are few examples of innovative technologies which are not patented and this data covers an important range of technological fields. Moreover, international patent family data enables the identification of all patent applications in different countries related to the single invention. An international patent family is defined as “a set of individual patents granted by various countries. The patent family is all the equivalent patent applications corresponding to a single invention, covering different geographical regions. Patent family size is a measure of the geographical breadth for which protection of the invention is sought” (OECD, 2011a, p.230).
38To identify patent applications related to environmentally-friendly technologies, we use the classifications produced by Dechezleprete et al. (2009) and those constructed by the OECD Work Group on the ENV-Tech Indicator. These classifications enable the identification of environmental technologies from their IPC codes, which are attributed at the patent registration stage. Selected IPC codes for the empirical analysis of technology transfers from Japan to China are available in Table 1. On the one hand, selected patents concern environmental technologies which aim at reducing pollutant emissions (air pollution abatement, water pollution abatement, waste management, soil remediation, environmental monitoring, carbon capture and storage, and methane capture). On the other hand, six renewable energy technologies are selected: wind power, solar power, geothermal, ocean power, hydropower and biomass.
IPC codes related to climate change – Environmentally-friendly technologies selected
IPC codes related to climate change – Environmentally-friendly technologies selected
Methodologies for data collection on environmental technology transfers
39Two methodologies are adopted to ascertain that there is a dynamic of environmentally-friendly technology transfers from Japan to China (figure 5).
Methodologies to quantify environmentally-friendly technology transfers through the PATSTAT database
Methodologies to quantify environmentally-friendly technology transfers through the PATSTAT database
40First, we have extracted from the PATSTAT database all patent applications related to environmental technologies (Table 209 IPC Class Symbol); these applications are distinguished according to their application identification number. This categorisation enables us to select all patents for which the inventor’s residence country is Japan (Table 206 Person Country Code), and for which the registration authority is China (Table 201 Applicant Authority). To determine the date of the invention, we have classified selected patent applications by priority date (Dernis et al., 2001) (Table 201 Application Filing Date). This methodology enables us to determine the innovative Japanese environmental technologies protected in China.
41Second, we have selected all environmental patents (corresponding to IPC codes specified in Table 1) from Table 209 IPC Class Symbol, classified by application identification numbers. We have then selected all patents which belong to the same patent family (Table 218 Docdb Family Id), and which are registered in both Japan and China (from the Table 201 Applicant Authority). Differences in registration dates in Japan and China (Table 201 Application Filing Date) enable us to identify the transfer’s direction. In other words, a patent family includes all patent applications corresponding to a single invention, and we have selected all environmental patent families for which an application has been carried out in China and Japan.
42Far from complementary, these two methodologies are two distinct approaches to quantifying environmentally-friendly technology transfers. The patents selected through the first methodology can also be included in those designated through the second. The utilisation of two distinct methodologies aims at verifying the results regarding the sectorial classification of the transfers.
Empirical analysis of technology transfers from patent data: results
43This part aims at presenting the results obtained with the two methodologies to determine environmentally-friendly technology transfers from Japan to China. First, we present the transfers identified by the technologies invented by Japanese entities and patented in China. Second, we present the results of the second methodology, based on patent family data.
Methodology 1. Japanese environmental technologies patented in China
44According to information available in the PATSTAT database (1985-2008), 2,363 environmental patents have been identified through the first methodology. These environmental innovations have been produced by Japanese entities and are protected in China. This dynamic appears when a Chinese subsidiary of a Japanese firm wants to protect its invention in order to sell it, or when this subsidiary wants to produce this invention while limiting imitation risks. The presence of innovative technologies in China can be beneficial to domestic companies through a learning effect for local employees, who use and/or produce the technology; and through a pro-competitive effect which drives other domestic firms to use the same technology (imitation and appropriation) (Sun et al., 1999; Wei et al., 2006).
45Figure 6 represents the increase in the number of environmental patents for which the inventor is Japanese and which are registered in China (data in stock and flows). The increased pace of the growth in the number of patents at the end of the 1990s and the early 2000s can be explained by the introduction of the Kyoto Protocol and deepening environmental concerns in China.
Japanese environmental patents registered in China (1985-2008)
Japanese environmental patents registered in China (1985-2008)
Notes : The annual flows of environmental patents are presented on the right axis (data represented by the curve). The stock of environmental patents (cumulative number of patents) represented by the histogram is presented on the left axis.46Differentiation by types of technologies shows that technologies are transferred in almost all the environmental fields analysed, except for soil remediation technologies. The transfers mainly concern clean-up technologies (76% of patents selected) and, to a lesser extent, renewable energy technologies (24%). More precisely, 40% of Japanese environmental patents registered in China are air pollution abatement patents, and nearly 26% are related to waste management. We can highlight that air pollution is an important environmental issue in China because of carbon emissions linked to fossil fuel combustion (mainly coal combustion). Japanese firms in China which use and/or devise innovative technologies aimed at reducing atmospheric pollution contribute directly, but also indirectly, to carbon emissions reduction (indirectly through the generalisation of the use of these techniques in the coming years).
47When we consider the six renewable energy technologies (hydro, wind, solar, biomass, geothermal, ocean), patent application flows are higher for solar technologies, and applications relating to wind energy have been rising since the beginning of the 2000s (figure 7). Japanese environmental patent applications in China related to wind energy and geothermal increased 51-fold and 39-fold respectively between 1995 and 2008, denoting the wider use of wind energy in China. Japan is one of the main innovators in the environmental field and its renewable energy innovations are focused on solar energy (81% of renewable energy patents) and, to a lesser extent, on wind energy (12.7%) (OECD database [9]).
Japanese environmental patent flows registered in China related to renewable energy generation (1985-2008)
Japanese environmental patent flows registered in China related to renewable energy generation (1985-2008)
48Moreover, China is not only an importer of foreign technologies; diffusion also takes place in the sectors for which it has some innovation capabilities. Chinese patent applications related to photovoltaic and wind technologies represent respectively 30.35% and 19.80% of Chinese patents registered within the renewable energy category. The fact that the sectoral classification of the transfers and the Chinese technological capabilities do match suggests that the direction of the transfers is partly explained by the existence of technological prerequisites in the recipient economy.
49Regarding clean-up technologies, air pollution abatement technologies dominate the transfers, and patent applications have strongly increased since the end of the 1990s (figure 8). The Kyoto Protocol in 1997 regulating GHG emissions can be considered as an explanation of this increase, and the uncertainty on the extension of the Protocol after the expiration of the first period of commitment in 2012 can also explain the slowdown in these applications at the end of the first decade of the 21st century. The technologies of soil remediation are in the second rank, with 91 Japanese patents registered in China in 2003.
Japanese environmental patent flows registered in China related to clean-up technologies (1985-2008)
Japanese environmental patent flows registered in China related to clean-up technologies (1985-2008)
50Our analysis of environmentally-friendly technology transfers from Japan to China reveals two main results. On the one hand, renewable energy technologies are transferred in the sectors in which China has significant technological capabilities, facilitating the process of appropriation of foreign technologies (mainly solar and wind energy technologies). On the other hand, air pollution abatement technologies and waste management technologies dominate the transfers from Japan to China. As an Annex-B country, Japan has some binding commitments in the Kyoto Protocol and pursues R&D efforts to develop new technologies aimed at reducing emissions. The emission reduction potential in China is significant and these possibilities open commercial opportunities for Japanese firms.
Methodology 2. International patent families
51This second methodology determines the transfers through the extension of protection of a Japanese patent to China (same patent family). First, we show that the level of patents considered according to this second methodology is significantly higher (4,459 environmental patent families). Second, the sectoral classification of the transfers is similar to the first one. On the one hand, air pollution abatement technologies dominate the transfers (40% of patent families registered in Japan and in China), followed by waste management technologies (29% of patent families selected). On the other hand, renewable energy technologies represent 27% of technology transfers identified by patent families. In this category, as expected, solar and wind energy technologies dominate the transfers (respectively 11% and 8% of patent families), and the increase in environmental patent families has strengthened since the end of the 1990s (figure 9).
Sectoral classification of environmental patent families (1985-2008)
Sectoral classification of environmental patent families (1985-2008)
52Several determinants explain the technological diffusion density from Japan to China. First, as Dechezlepretre (2009) emphasises, restrictions on inward FDI have a positive impact on transfers. Chinese legislation on inward FDI positively affects the diffusion of environmental technologies: Japanese affiliates in China are strongly incentivised to transfer innovative technologies. Second, technological prerequisites in China as well as domestic R&D activities support the absorption of innovative environmental technologies and technological diffusion. Third, geographical and cultural similarities appear as determinants of the transfers. In this case, the closeness of Japan and China facilitates technology transfers and explains the density of the technological diffusion between these two countries.
Conclusion
53Given increasing environmental pressures in China, it seems that the acquisition of environmentally-friendly technologies should be an answer to compensate for, and decrease, the negative externalities of China’s manufacturing production processes. R&D intensity, technological activities and the operational effectiveness of the NSI constitute three factors accounting for the absorptive capabilities of the recipient country. In this regard, China has increased funding for R&D programmes and has implemented several public programmes to favour environmental innovation. Moreover, the legislative framework governing FDI inflows aims to favour the country’s technological upgrading and the acquisition of innovative foreign technologies. In this way, the Chinese technological and legislative environments contribute to the absorption of foreign technologies, even in the environmental field.
54The empirical analysis of environmental technology transfers from Japan reveals that two-thirds of the transfers are clean-up technologies (air pollution abatement technologies and waste remediation). Regarding renewable energy technologies, transfers are focused on solar and wind energy. This sectoral classification of the transfers reflects China’s environmental innovation activities. The development gap between China and Japan explains the importance of technology transfers, while the technological context in China favours this process.
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Notes
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[1]
OECD database (http://stats.oecd.org) accessed on 20.06.2012.
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[2]
“Torch Center is now working on the implementation of the Technology Transfer Promotion Activities to establish a national technology transfer mechanism which will help to create a technology innovation system with enterprises as the central player in partnership with research and educational organizations. The implementation of these activities will promote the dissemination and transfer of key industrial technologies, encourage and facilitate the establishment of regional technology transfer service alliances, ratify national technology transfer agencies at different levels, as well as the international technology transfer bases” (Torch High Technology Industry Development Center website accessed on 24.08.2013)(http://www.ctp.gov.cn/ctp-eng/areas_three.htm)
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[3]
Even if the Chinese government has begun to tackle environmental issues relatively late (since the 1970s), Chinese environmental regulations have accelerated since the 2000s, with several laws on atmospheric pollution, renewable energy and energy saving. As Huchet et al. (2008) highlighted, if we identify all the environmental initiatives China may be, amongst developing countries, the country which has made the most important efforts to decrease energy consumption.
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[4]
Energy Technology Information Network website, accessed on 22.08.2013 (http://www.etiea.cn/data/attachment/123(6).pdf)
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[5]
“The investment in research and development (R&D) will account for 2% of gross domestic product (GDP) in 2010 and 2.5% of GDP in 2020 (…). China has continuously increased the investment in science and technology since the implementation of reform and opening up more than two decades ago. However, compared with the developed countries and the emerging industrialized nations, the investment is still insufficient, the investment structure is not reasonable and the basic conditions for science and technology are still weak (…). The government should play a leading role in the increase of scientific investment. And the capability of the government to coordinate the scientific resources of the whole society should be strengthened through financial and taxation policies.” Chinese Government’s Official Web Portal (http://www.gov.cn/english/2006-02/09/content_183777.htm) accessed on 01.03.2013
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[6]
The terms “environmentally-friendly technologies”, “green technologies” as well as “environmentally sound technologies” are used indifferently to designate technologies the use of which saves natural resources and/or decreases pollutant emissions (GHG, ozone-depleting substances, land and marine pollution…). We retain the definition of the International Panel of Climate Change (IPCC), that is “technologies which protect the environment, are less polluting, use all resources in a more sustainable manner, recycle more of their wastes and products, handle residual wastes in a more acceptable manner than the technologies for which they were substitutes, and are compatible with nationally determined socio-economic, cultural and environmental priorities” (IPCC, 2000, p. 52).
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[7]
Accessed on 20.06.2012.
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[8]
Patents are classified by priority date and according to the inventor’s country of residence. Fractional accounts are applied to patents which have several inventors (OECD, 2009).
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[9]
Accessed on 20.06.2012.
