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Since at least the beginning of the 1990s, economists have noted that innovation is indispensable to competitive advantage. But what about for manufacturing? Conventional wisdom has long been hostile to altering proven production methods.\n\nBut this is changing. Take the example of the People\u2019s Republic of China.\n\nTwenty-two years after the government\u2019s 1978 economic reforms, China\u2019s global manufacturing output was one-quarter that of the United States. Eleven years later, China had eclipsed the United States to become the world\u2019s greatest producer. \n\nExplanations for this surge highlight abundant labor, state subsidies, and growing local demand. Yet those could be found elsewhere, not just in China. The explanation must go deeper.\n\nRead the transcript\nhttps://bit.ly/2PGGFDb\n\nRead the working paper\nhttps://www.adb.org/publications/innovation-and-firm-performance-prc-structural-approach-spillovers\n\nAbout the author\nAnthony Howell is an assistant professor at the School of Economics of Peking University, Beijing, People\u2019s Republic of China.\n\nKnow more about ADBI\u2019s work\nhttps://bit.ly/2wpN0dg\nhttps://bit.ly/2MzkTmJ\nhttps://bit.ly/2ojI31O\nhttps://bit.ly/2wp9hZq