The importance of science, technology and innovation for long-term economic development is indisputable. However, innovation has never been limited to scientific and technological innovation alone; the crucial innovation is institutional innovation. In the past 30 years of reform and development, China has transformed from a planned economy to a market economy and gradually become the world's second largest economy, which is inseparable from its remarkable achievements in economic development and technological progress. The most important of these achievements is institutional innovation.

  Looking at the overall innovation development situation in the world, technological innovation plays a vital role in the economic development of a country or region. But in fact, only the economic development of developed countries will rely on technological innovation. Because the science and technology innovation system in developed countries has been relatively perfected, in terms of capital investment, human resources integration, land resources investment, etc., the allocation of the above-mentioned resources through the market leverage has reached a relatively balanced state.

  However, for all the developing countries in the world that have been able to develop rapidly in a short period of time, institutional innovation, rather than technological innovation, must have come first. Therefore, the main reason for underdevelopment is that imperfect institutions have shackled economic development and become a hindrance rather than a driving force. Scientific and technological innovation must first remove institutional constraints.

  If we do not realize the importance of institutional innovation, mistakenly believe that technological innovation determines everything, ignore the basic institutional conditions for technological innovation, and force technological innovation, we will not only fail to achieve what we want, but will also be bound by the system, causing enormous risks and even major economic losses. For example, the "technological innovation" during the "Great Leap Forward" in 1958 was a typical case, in which the production of 10,000 kilograms of grain per mu was a typical example, and the so-called science was also involved.

  We've been talking about the system. What good is a system? In the process of science and technology innovation, the choice of personnel, the choice of projects to follow, the direction of industry trends, the amount of money to be paid for the transformation of scientific and technological achievements, how the money is paid, who makes these decisions, etc., all depend on the system. Different systems exhibit different institutional norms and frameworks. In most market matching decisions, the role of the government is often not direct, is with auxiliary, supportive. Because even under a perfect institutional framework, STI does not use market mechanisms to match technological innovation, the government cannot effectively solve all kinds of STI problems.