The Frontiers in Manufacturing Technologies Initiative and University Innovation

• Published date: 01 September 2024
• Author: Xuan Leng,Yichuan Zhang
• Date: 01 September 2024
• DOI: http://doi.org/10.1111/cwe.12553

©2024 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 197–225, Vol. 32, No. 5, 2024 197

The Frontiers in Manufacturing Technologies

Initiative and University Innovation

Xuan Leng, Yichuan Zhang*

Abstract

Basic innovation, with universities as a key driver, is essential for advancing core

technologies in the manufacturing industry. This study used a manufacturing technologies

initiative as a natural experiment, combining funding and its outcomes data from the

National Natural Science Foundation of China to construct a difference-in-differences

model. It found that the Frontiers in Manufacturing Technologies Initiative had a positive

effect on university innovation, particularly by increasing the number of university

patents. Mechanism analysis showed that the policy mainly encouraged university

innovation through university-industry collaboration. The effect was more salient in

universities with stronger basic research capabilities and those whose research fields

matched strategic emerging industries covered by the initiative. This study underscores

the crucial role of the Frontiers in Manufacturing Technologies Initiative in enhancing

university-led innovation. It highlights the effectiveness of industry-academia partnerships

in advancing technology, particularly in emerging strategic industries.

Keywords: industry policy, joint innovation, university-industry collaboration, university

innovation

JEL codes: O21, O31, Q55

I. Introduction

Basic innovation is widely recognized as crucial for technology transfer, fostering

creativity, and driving high-quality economic growth (Prettner and Werner, 2016;

Criscuolo et al., 2019; Kantor and Whalley, 2019). The encouragement of innovation

is therefore a shared concern for governments worldwide. Since 2018, the US has

*Xuan Leng, Associate Professor, China Center for Special Economic Zone Research, Shenzhen University,

China. Email: lengxuan2023@163.com; Yichuan Zhang (corresponding author), PhD Candidate, School

of Government, Sun Yat-sen University, China. Email: zhangych236@mail2.sysu.edu.cn. The authors are

grateful for support from the China Center for Special Economic Zone Research of Shenzhen University,

Interdisciplinary Innovation Team Project for High-level University Phase III Construction of Shenzhen

University (No. 24JCXK02), and the National Natural Science Foundation of China (No. 72403167).

Xuan Leng, Yichuan Zhang / 197–225, Vol. 32, No. 5, 2024

©2024 Institute of World Economics and Politics, Chinese Academy of Social Sciences

198

implemented industrial policies, such as the “Strategy for American Leadership in

Advanced Manufacturing” and the “National Security Strategy,” which demonstrate a

clear tendency towards subsidizing and protecting specific industries. More recently,

the US has enacted the “CHIPS and Science Act” and the “Inflation Reduction Act,”

directly supporting the semiconductor and renewable energy sectors. This policy

direction has had a demonstrative effect on other Western nations, including the EU,

the UK, and Japan, spurring a revival of industrial policy in these regions. Basic

research, with universities playing a key role, serves as the root of innovation and,

is crucial for advancing technological progress and economic development. Recent

studies have shown that various factors can improve the efficiency of basic innovation.

However, beyond their direct effects, innovation policies are widely believed to generate

significant externalities. Yet, estimating and measuring these externalities has remained

a challenge. This paper contributes to the literature by innovatively examining the

externalities of innovation policies from the perspective of industrial policy, offering

new insights into how these policies can guide university innovation and foster

collaboration between academia and industry.

The Chinese government has launched an initiative called the Frontiers in

Manufacturing Technologies Initiative (FMTI) to address key challenges in core

manufacturing technologies. Although the FMTI does not emphasize basic research, it

provides universities with insights into industry trends and fosters industry-academia

partnerships by outlining industry-specific needs.

The FMTI highlights the importance of universities and research institutes in

addressing crucial core technologies. It aims to promote collaboration between

universities and enterprises in terms of talent, laboratories, and technology. This

provides an opportunity to investigate whether cutting-edge technological initiative

affects university innovation. The FMTI focuses on 10 major industries. Unlike other

initiatives, it does not show any preference towards specific universities or propose

funding for particular institutions. Thus, it can be considered an exogenous shock for

university innovation.

Using a difference-in-differences (DID) design, we compared the outcomes

of universities that were more affected by the FMTI with those that were less

affected. Instead of dividing control and treatment groups directly based on industry

classification codes, this study adopted a more nuanced approach. It compared the

technical specifications of the 10 major areas announced by the FMTI with the texts

of the abstracts of National Science Foundation of China (NSFC)-funded projects

from various universities in China. Utilizing the identification methods proposed

by Hausman (2022) and Kantor and Whalley (2023), it calculated the similarities