What determines innovation in the manufacturing sector at the private firm level? Evidence from China

Abstract: The objective of this study is to explore the determinant of innovation in the manufacturing sector at the private firm level in china. The data comes from the World Bank survey, China - Enterprise Survey Manufacturing Module (2012). In this paper, I used the broad definition of innovation that includes product and process innovation. Based on the survey answers, I sought to test four hypotheses by employing possible variables linked with key theoretical and empirical models including competition, access to finance, R&D activities and industry as independent variables and controlling for a set of private firm characteristics including age, size and location, among others. I found evidences supporting two of my hypotheses indicating that access to finance and R&D expenditure are crucial determinists for private firm’s innovativeness.