Technology Diversity and Development: Evidence from China’s Industrial Enterprises

(under review) A stylized fact of technical change in developing economies is that of Harrod-neutral labor augmenting technical change arising from capital deepening. While in the aggregate this pattern of technical change is widely observed, at the firm level a variety of channels of technical change and factor biases are possible. Using a large set of firm-level panel data for China’s industrial enterprises, this paper identifies three channels of technical change, each associated with a different pattern of factor bias and underlying firm objective. Autonomous, time-dependent capital-using technical change drives the neoclassical growth process. Robustly labor-using and capital- and energy-savings in-house R&D capitalizes on China’s comparative advantage, and the purchase of imported technologies, which are comparatively capital using, focuses on new product development. As part of its task, internal R&D adapts imported technology to make it more "appropriate " (i.e. less capital using). These diversified channels of technical change reveal a pattern of developing country technical change that is far more diversified than that suggested by the conventional growth literature