IV. Tertiary Education and the Innovation System

IV. Tertiary Education and the Innovation System

Source: Beijing, Shanghai and China Statistical Yearbooks, various years; Hong Kong: Education Bureau, Tokyo Metropolitan Government

Source: Beijing, Shanghai and China Statistical Yearbooks, various years; Hong Kong: Education Bureau; Japan MEXT

Source: Beijing, Shanghai and China Statistical Yearbooks, various years; Hong Kong: Education Bureau; Japan MEXT. Hong Kong: the University Grants Committee

(http://www.ugc.edu.hk/eng/ugc/publication/report/figure2007/figures/03.pdf).

Source: Beijing, Shanghai and China Statistical Yearbooks, various years; Japan MEXT, Hong Kong: the University Grants Committee

(http://www.ugc.edu.hk/eng/ugc/publication/report/figure2007/figures/03.pdf).
The quality of graduates is a different matter and there is scope here for substantial improvement in order to raise Shanghai’s technological capacity and prepare the ground for innovation.¹¹⁵ Employers find that graduates from even the finest universities have a number of limitations. Although the better graduates have a sound grasp of theory, they lag behind in their knowledge of the latest developments in their fields, have weak communication and practical problem solving skills, and given the emphasis on rote learning, graduates tend to display limited initiative when on the job. According to Simon and Cao (2008, p.192) many students who are “fresh out of universities have trouble handling tasks that require knowledge and skills beyond formal education”. Most firms need to invest in 3 to 6 months of training to upgrade the technical and practical skills of their new hires and to instill the corporate culture. More than quantity, Shanghai’s tertiary education system now needs to focus on quality of skills hard and soft as innovativeness depends on both. This will require years of effort not just by the universities but also by the municipality and the central government to embed a creative culture (Yusuf 2009b). Only about 10 percent of Chinese professors have doctoral level qualifications – 20 percent in elite institutions (Simon and Cao 2008). This is being remedied through new hires but experience will remain in short supply for some time.

In order to close the skill gap, the Shanghai government spent 27 billion yuan on social security and job related expenditure in 2007 (13 percent of the fiscal expenditure as against 10 percent in 2006, see Table 5 .37) so as to provide more people with career-related training (see Table 5 .38). In 2007, more than one million persons (this includes double-counting) received training through public training institutes, an increase of 25 percent over 2004. Raising the quality of education could lessen the need for such remedial training by public institutes and firms.

Source: Center for World-Class Universities, Shanghai Jiao Tong University

(http://www.arwu.org/rank2008/en2008.htm).

Table 5.40: Times Higher Education Global Ranking of Universities, 2007

Source: Times Higher Education

(http://www.timeshighereducation.co.uk/hybrid.asp?typeCode=243&pubCode=1&navcode=137).
The volume of S&T skills and the quality of the workforce is an indicator of technological capacity of relevance to advanced manufacturing industries. The level of R&D and its productivity is a gauge of innovation capacity. Shanghai invested 2.6 percent of its GDP in R&D in 2007 up from 1.3 percent in 1995 and more than a percentage point higher than the average for China (see Table 5 .41).¹¹⁶ This is second only to Beijing which invests 6 percent. As is the case in the rest of China and in industrialized countries, two thirds of the R&D is done by firms. The distribution of R&D in Shanghai and in Beijing is shown in Figure 5 .15 and Table 5 .42. The trend is in the direction seen in the advanced industrial economies, away from government institutes towards firms and universities. However, the productivity of R&D in many of the SOEs is questionable. Most of these companies do not yet have in place the business models, incentives, and experienced managerial and supervisory staff to effectively organize research activities, to derive adequate benefits from R&D by integrating it closely with production and marketing, and to routinize incremental innovation throughout the firm. However, some of the SOEs are learning how to harness their R&D more effectively. The value of R&D by MNCs and the spillovers are also questionable. It is difficult to say whether enough core R&D is being done in Shanghai by MNCs and given worries over IP, probably relatively little. The fact that hardly any researchers leave major MNCs to start their own firms would point to few much needed spin-offs although employee turnover in the MNCs does transfer knowledge to local producers.

The share of universities in research was about 10 percent in 2006, about the same as in 2001. As most of the basic and upstream applied research vital for innovation in high tech industries is likely to be conducted in universities, in future they have a major role in pushing outward the frontiers of potentially commercializable knowledge and in imparting the skills of relevance for dynamic fast growing industries (see Figure 5 .16).¹¹⁷ Thus growth in the shares of universities and of basic research in total research, are desirable developments.

Source: Beijing, Shanghai and China Statistical Yearbooks, various years; Tokyo: TMG (http://www.toukei.metro.tokyo.jp/keizaik/kk05pa1000.xls); Hong Kong: Science & Technology Statistics Section, Census and Statistics Department, May 2008 Revision; Japan: World Development Indicators (WDI) 2008.

Source: Shanghai Science and Technology Yearbook 2007

Figure 5.16: R&D Expenditure by Type of Institution in Shanghai

Source: Shanghai Science and Technology Yearbook 2007