Breakthrough? China's and India's transition from production to innovation

China and India have become major producers of products and services for global markets. This article explores to what extent they are also building up innovation capabilities. It draws on a combination of approaches-innovation systems, global value chains and professional networks-to analyze four of the most dynamic industries. We find that mounting innovation efforts only rarely materialized in cutting-edge innovations but suggest that if capital accumulation proceeds at the current pace, innovation capabilities will rapidly be built up in China and, with a time lag, India. We conclude by setting out the implications for both the developed and the developing world. (C) 2007 Elsevier Ltd. All rights reserved.