Table 6 Policy aspects and characteristics of the innovation system - China and the USA

• Innovation system driven by government policies (state intervention)

• Innovation system driven by market forces (private sector driven)

• Entrepreneurship style of using imported goods and ideas to create innovations

• Entrepreneurship style of risk-taking and tolerance for failure

• Commercial copying and replication

• Research-based innovation (The launch of innovations relies heavily on research as a result of R&D investments)

• Insufficient protection of intellectual property rights (ineffective government policy to punish piracy and infringement of IPs)

• Effective intellectual property (IP) policies provide key incentives to stimulate innovations

• Cheap labor costs enable the capability to undercut prices in market competition

• High labor cost lead to labor-saving technology and innovations

• The operation of Shanghai Stock Exchange and Shenzhen Stock Exchange to provide money-raising channel for SMEs but their functions are not NASDAQ equivalent

• The capital markets are highly developed (such as the New York Stock Exchange (NYSE), Boston Stock Exchange, Cincinnati Stock, etc.) with the operation of the National Association of Securities Dealers Automated Quotations System (NASDAQ) Market Center to support technology-based firms

• China has the formal business angel market but its business angel community is still small

• The US has the formal angel investing networks which provide not only finance but also mentoring to newly formed businesses.

• The Chinese VC industry is growing but still needs incentive programs to foster the developing economy

• The policies comprise the state and federal level to promote angel investing.

• The US VC market is highly developed to support technology-based firms