Enabler or barrier: Impact of patent protection on technology diffusion in China

Technology diffusion has facilitated long-term socio-economic progress. Therefore, most countries are striving to offer an environment conducive to innovation, including the establishment of appropriate intellectual property rights (IPR). However, the role of IPR in promoting technology diffusion remains controversial. Specifically, patents promote technology diffusion by protecting inventions and disclosing knowledge to the public, while triggering exclusive rights that may hinder technology diffusion. Based on signal theory, the existing research perspective is extended from “point-to-point” (inventor-imitator) to “point-to-side” (inventor-potential inventor) to investigate the technology diffusion regarding peer firms of defendant in patent litigation. The results show stronger technology diffusion in peer firms of defendant after patent litigation. Two mechanisms of litigation signals are demonstrated through grouping tests: legitimacy and competitiveness. This study contributes to resolving the contradictory literature on IPR and technology diffusion, while also complementing studies on IPR in developing countries.