The role of policy and markets in the development of the solar photovoltaic industry: Evidence from China

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Sun, Xiaojing
Brown, Marilyn A.
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This dissertation looks at the technological innovation and market competitiveness of the solar PV industry in China, and examines the role played by policy and markets in the development of the industry. Using solar cell lab efficiency and the quality and quantity of solar PV patents as indicators, this study finds that, unlike what conventional wisdom assumes, China is closing the innovation gap between itself and the world’s leading innovators. This is mainly due to three reasons: a national strategic vision for innovation, growing public and private R&D investment, and an innovation ecosystem made of government sponsored science and technology programs and technology-specific global innovation networks. Solar PV manufacturing in China thrived on a fully-developed self-sufficient domestic supply chain that features a few highly concentrated industrial clusters, such as the one in the Yangtze River Delta area. The agglomeration economies it created, combined with economies of scale development, commercialization-oriented innovation, and attention to low-cost production are mainly responsible for the competitiveness of the solar PV manufacturing industry in China. However, weakness in tooling and material production due to a lack of advanced scientific knowledge and manufacturing skills constrains the further development of the supply chain. The emphasis on process innovation also renders the industry vulnerable to disruptive technologies. Moving forward, policymakers should continue to promote global research networks and local production networks, and use innovation as a crosscutting lever to integrate R&D conducted in labs with innovation needed in the manufacturing sector and the supply chain.
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