Does institutional context matter in building innovation capability?

Our study investigates whether changes in China's reform policies had an influence on the national innovation capability building. Specifically, our study empirically examines the relationship between national innovation capability and the roles of key drivers from 33 administrative regions across the two periods of the reform (1991-1998 and 1999-2005) with four types of domestic patents during 1992-2009. The data is drawn from government official statistics, using STATA for panel analysis. Overall findings demonstrate that the innovation environment was changed and consequently changed the impact of drivers on China's innovation capability differently between the two periods, which helps provide a better understanding of the effect of innovation system reform in each phase in China. We extend research on innovation capability to emerging economies and enhance our understanding of how the government policies shape a country's innovation capability through mechanisms of key innovation drivers in emerging economies.