To understand the institutional structure for research and development in China, it is important to look beyond R&D institutions per se and examine the whole process of technological innovation. This is necessary because, over the longer run, political support for R&D efforts in China will require the successful development of technological innovation processes. When the Chinese talk about science and technology as the key to the modernization of agriculture, industry, and national defense, they ultimately are talking about technological innovation in the interests of increased economic productivity and sophistication of military technology. But, as a report of the Organization for Economic Cooperation and Development (OECD) put it some years ago, "Technological innovation is more than R&D." 1 Thus, a discussion of the institutional setting for industrial R&D must first ask how technological innovation occurs and will continue to occur in the People's Republic of China.