Innovation in China: Evidence from the provincial data

China has made remarkable gains in industrialization and development. In the last years, in order to ensure the sustainability of its economic and social development, China gave more importance to the innovativeness of business enterprises. In the domestic arena, the sustainability of the growth model that China has followed over the past decades has been criticized because of its excessive reliance on capital and resources as opposed to knowledge and innovation. In 2006, that transformation has been at the centre of the government‟s “scientific development strategy”. Today, in fact, innovation and promotion of entrepreneurship are essential conditions for competitiveness of firms and nations, for the long-term growth and, therefore, for the economy as a whole. This paper investigates the level of potential innovation reached in China in 2008 through a disaggregated analysis, evaluating the production capacity of the Chinese provinces. “Innovation” has been widely studied by economic literature, specially with reference to the output. In this paper, we will refer to the European Innovation Scoreboard (EIS) index, to measure the progress of innovation, which represents the skill to innovate of a territory, but not the achieved innovation. First, we will propose some methodological changes of this method, that allows to obtained a ranking, in order to better understand the results reached by the Chinese provinces; Then we will test a different methodology in order to measure the level of potential innovation overcoming the limits of current practice—from a composite index obtained through a mean of disaggregated indices to multivariate analysis.