This paper highlights the consequences of internationalisation for innovation and technological capacities in China. By using a disaggregated dataset from the 31 provinces (1997–2007) and by constructing a local Chinese production frontier as a benchmark, the paper decomposes the labour productivity growth into three components: technological change, efficiency change and capital deepening. Simple regression analysis is applied to further investigate technology differences at the provincial level. In particular it is tested whether initially lagging Chinese provinces tend to grow faster than the provinces that were initially close to the research and production frontier. The results show that increases in technology resulted in a divergence in labour productivity, while increased capital deepening resulted in convergence in labour productivity across the Chinese provinces. The results also suggest that throughout 20 years the main sources for labour productivity growth has been capital deepening while technological progress and efficiency changes played a much less influential role for explaining differences at the provincial level.
Keywords: economic development, productivity, internationalisation, innovative capacities, technological change, regional data, China