IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v102y2025ics105905602500526x.html

Design innovation and firm performance: Evidence from patent subtype analysis

Author

Listed:
  • Han, Zhenfu
  • Tang, Shiyu
  • Li, Zhuoran

Abstract

This paper investigates the differential impacts of various subtypes of design patents on firm financial performance, as measured by return on assets (ROA), using a panel dataset of 8671 firm-year observations from Chinese listed firms over the period 2017 to 2023. We disaggregate design innovation into four subtypes and construct a composite Design Index via principal component analysis. Employing both fixed effects and random effects panel regressions, we find that each design-innovation subtype, as well as the composite index, exerts a positive and statistically significant effect on ROA. Moreover, we demonstrate that sales growth mediates this relationship, suggesting that design innovation enhances asset productivity primarily through revenue expansion. Robustness checks using one-year lagged patent variables confirm the persistence of these effects and mitigate endogeneity concerns. Our findings highlight the strategic value of not only the volume but also the collaborative and temporal dimensions of design patenting in driving firm profitability.

Suggested Citation

  • Han, Zhenfu & Tang, Shiyu & Li, Zhuoran, 2025. "Design innovation and firm performance: Evidence from patent subtype analysis," International Review of Economics & Finance, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:reveco:v:102:y:2025:i:c:s105905602500526x
    DOI: 10.1016/j.iref.2025.104363
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S105905602500526X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.iref.2025.104363?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Chen, Han & Wu, Linsheng, 2024. "Manager's entrepreneurial experience and firm innovation," Finance Research Letters, Elsevier, vol. 66(C).
    2. Hanqing Fang & James J. Chrisman & Joshua J. Daspit & Kristen Madison, 2022. "Do Nonfamily Managers Enhance Family Firm Performance?," Small Business Economics, Springer, vol. 58(3), pages 1459-1474, March.
    3. Kang, Haijun & Chi, Shangping & Wang, Xiuzhong & Li, Zhuoran, 2025. "How does the toxic and sustainable index influence on corporate performance? A comparison analysis before and after pandemic," International Review of Economics & Finance, Elsevier, vol. 100(C).
    4. Alex Burnap & John R. Hauser & Artem Timoshenko, 2023. "Product Aesthetic Design: A Machine Learning Augmentation," Marketing Science, INFORMS, vol. 42(6), pages 1029-1056, November.
    5. Huang, Qiongyu & Xu, Chuhong & Xue, Xiaolong & Zhu, Hui, 2023. "Can digital innovation improve firm performance: Evidence from digital patents of Chinese listed firms," International Review of Financial Analysis, Elsevier, vol. 89(C).
    6. Cappelli, Riccardo & Corsino, Marco & Laursen, Keld & Torrisi, Salvatore, 2023. "Technological competition and patent strategy: Protecting innovation, preempting rivals and defending the freedom to operate," Research Policy, Elsevier, vol. 52(6).
    7. Zhai, Zhe & Ghosal, Vivek, 2022. "Internationalization of innovation and firm performance in the pharmaceutical industry," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 882-905.
    8. Bryan Kelly & Dimitris Papanikolaou & Amit Seru & Matt Taddy, 2021. "Measuring Technological Innovation over the Long Run," American Economic Review: Insights, American Economic Association, vol. 3(3), pages 303-320, September.
    9. Ullah, Farid & Jiang, Ping & Elamer, Ahmed A. & Owusu, Andrews, 2022. "Environmental performance and corporate innovation in China: The moderating impact of firm ownership," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    10. Wei Wu & Chau Le & Yulu Shi & Fadi Alkaraan, 2024. "The influence of financial flexibility on firm performance: the moderating effects of investment efficiency and investment scale," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 25(5), pages 1183-1202, March.
    11. Zhang, Huaqing & Zhang, Xiangjian & Tan, Haoyu & Tu, Yongqian, 2024. "Government subsidies, market competition and firms' technological innovation efficiency," International Review of Economics & Finance, Elsevier, vol. 96(PA).
    12. Luo, Qi & Deng, Lisha & Zhang, Zeming & Wang, Hao, 2025. "The impact of digital transformation on green innovation: Novel evidence from firm resilience perspective," Finance Research Letters, Elsevier, vol. 74(C).
    13. Wen, Wen & Qiao, Fei & He, Ying, 2023. "Strategic deviation and corporate green innovation," Finance Research Letters, Elsevier, vol. 54(C).
    14. Kam C. Chan & Yining Chen & Baohua Liu, 2021. "The Linear and Non-Linear Effects of Internal Control and Its Five Components on Corporate Innovation: Evidence from Chinese Firms Using the COSO Framework," European Accounting Review, Taylor & Francis Journals, vol. 30(4), pages 733-765, August.
    15. Hongxing Peng & Yuanyuan Xu, 2025. "How does intellectual property protection matter? Infringement disputes and corporate innovation investment persistence," Applied Economics Letters, Taylor & Francis Journals, vol. 32(4), pages 582-585, February.
    16. Zhao, Qiuhan & Wu, Wei & Ge, Yuanqin & Xu, Jing, 2025. "Can intellectual property protection policy enhance enterprise innovation capability? Quasi-natural experimental study," International Review of Financial Analysis, Elsevier, vol. 103(C).
    17. Huang, Youlin & Qian, Lixian & Soopramanien, Didier & Tyfield, David, 2021. "Buy, lease, or share? Consumer preferences for innovative business models in the market for electric vehicles," Technological Forecasting and Social Change, Elsevier, vol. 166(C).
    18. Li, Quan & Chen, Huimin & Chen, Yang & Xiao, Tong & Wang, Li, 2023. "Digital economy, financing constraints, and corporate innovation," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    19. Li, Yuanheng & Chai, Xinyu & Su, Ruiqian & Chen, Kedong, 2025. "Impact of accelerated depreciation policies for fixed assets on firms’ green innovation performance," Finance Research Letters, Elsevier, vol. 74(C).
    20. Keun Lee & Raeyoon Kang & Donghyun Park, 2022. "How Industrial Design Matters for Firm Growth at Different Stages of Development: Evidence from Korea, 1970s to 2010s," Asian Economic Journal, East Asian Economic Association, vol. 36(2), pages 101-126, June.
    21. Doroteja Mandarić & Anica Hunjet & Dijana Vuković, 2022. "The Impact of Fashion Brand Sustainability on Consumer Purchasing Decisions," JRFM, MDPI, vol. 15(4), pages 1-17, April.
    22. Wang, Jingru & Wu, Zhuochen & Fang, Xinwei, 2024. "How does innovation disclosure respond to heightened entry threats?," Finance Research Letters, Elsevier, vol. 62(PA).
    23. Andersson, David E. & Ekman, Anton & Huila, Anton & Tell, Fredrik, 2023. "Industrial design rights and the market value of firms," Technological Forecasting and Social Change, Elsevier, vol. 196(C).
    24. Wu, Wei & Zhang, Shiyu & Fan, Yali & Shi, Yulu, 2024. "Financial flexibility, firm performance, and financial distress: A comparative study of China and the U.S. during pandemics," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    25. Peter Bogetoft & Lene Kroman & Aleksandrs Smilgins & Anders Sørensen, 2024. "Innovation strategies and firm performance," Journal of Productivity Analysis, Springer, vol. 62(2), pages 175-196, October.
    26. Usama Awan & Marlen Gabriele Arnold & Ismail Gölgeci, 2021. "Enhancing green product and process innovation: Towards an integrative framework of knowledge acquisition and environmental investment," Business Strategy and the Environment, Wiley Blackwell, vol. 30(2), pages 1283-1295, February.
    27. Ivo Zander & Udo Zander, 2005. "The Inside Track: On the Important (But Neglected) Role of Customers in the Resource‐Based View of Strategy and Firm Growth," Journal of Management Studies, Wiley Blackwell, vol. 42(8), pages 1519-1548, December.
    28. Liu, Tingyu & Huang, Peng & Wang, Qiaoru, 2025. "The impact of digital innovation on labor share: Evidence from Chinese firms," International Review of Economics & Finance, Elsevier, vol. 99(C).
    29. Deepak Hegde & Kyle Herkenhoff & Chenqi Zhu, 2023. "Patent Publication and Innovation," Journal of Political Economy, University of Chicago Press, vol. 131(7), pages 1845-1903.
    30. Wang, Meiying & Wang, Jingyu & Chi, Yujie & Yuan, Jinghong, 2025. "The spillover effect of customer executives' environmental background on suppliers' green innovation," International Review of Financial Analysis, Elsevier, vol. 104(PA).
    31. Marjit, Sugata & Yang, Lei, 2015. "Does intellectual property right promote innovations when pirates are innovators?," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 203-207.
    32. Tang, Tanya (Ya) & Zhang, Shaoling (Katee) & Peng, Jianping, 2021. "The value of marketing innovation: Market-driven versus market-driving," Journal of Business Research, Elsevier, vol. 126(C), pages 88-98.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tian, Xinci & Ma, Yueyue, 2026. "Digital asset intensity and strategic disclosure effects on firm performance: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 105(C).
    2. Xie, Sisi & Tong, Zhenghao, 2025. "Innovation meets governance: Design patent activities’ impact on corporate success," Finance Research Letters, Elsevier, vol. 85(PE).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tian, Xinci & Ma, Yueyue, 2026. "Digital asset intensity and strategic disclosure effects on firm performance: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 105(C).
    2. Zhou, Fuyuan & Chen, Hanlong & Tang, Shiyu & Lee, Chuan & Lin, Chin-Tsai, 2025. "Integrating ESG into financial distress models: The role of financial report quality and innovation in the Chinese market," International Review of Economics & Finance, Elsevier, vol. 101(C).
    3. Li, Junming & Zhang, Guoqing & Gong, Zhengqi & Ma, Xiaona, 2025. "The synergistic effects of financial development and industrial structure on urban decarbonization," International Review of Economics & Finance, Elsevier, vol. 103(C).
    4. Zheng, Shilong & Piao, Xuelian, 2026. "Family ownership, managerial incumbency, and firm performance: Evidence from China under policy uncertainty," Finance Research Letters, Elsevier, vol. 90(C).
    5. Xie, Sisi & Tong, Zhenghao, 2025. "Innovation meets governance: Design patent activities’ impact on corporate success," Finance Research Letters, Elsevier, vol. 85(PE).
    6. Fan, Yali & Wang, Xiuzhong & Li, Zhuoran & Wu, Wei, 2025. "From harm to Hope: How green innovation alleviates environmental injustice triggered by non-green innovation," International Review of Economics & Finance, Elsevier, vol. 101(C).
    7. Wang, Bi, 2026. "Intellectual property collateralization and credit access: Evidence from patent pledging in China," Finance Research Letters, Elsevier, vol. 89(C).
    8. Liu, Changqing & Mastor, Nor Hamimah, 2026. "Can data asset intensity alleviate the risk of financial distress?," Finance Research Letters, Elsevier, vol. 90(C).
    9. Guo, Xiaochuan & Li, Pengcheng & Wang, Fengzheng, 2026. "How do data assets enhance firm value in the digital economy: Evidence from listed tech firms," Finance Research Letters, Elsevier, vol. 91(C).
    10. Song, Qinyue & Yan, Mingyi & Shi, Zhengxin & Han, Zhenfu, 2026. "Exploring the financial mechanisms of digital inclusion in promoting farmers’ income," Finance Research Letters, Elsevier, vol. 92(C).
    11. Ying, Xuehai & Luo, Beibei, 2025. "Reducing forecast uncertainty in China’s gold futures market through mixed-frequency volatility modeling," Finance Research Letters, Elsevier, vol. 86(PG).
    12. Wang, Guan & Zhang, Mengchen & Ji, Zihao & Qian, Junwei, 2025. "Investment efficiency and ESG performance: Does board governance matter?," Finance Research Letters, Elsevier, vol. 85(PB).
    13. Yang, Manze & Liao, Yun & Li, Mingyue, 2026. "Does supply chain finance development alleviate cash flow volatility in entrepreneurially oriented firms?," Finance Research Letters, Elsevier, vol. 88(C).
    14. Zheng, Shilong & Dong, Qi & Lin, Yunshi, 2026. "Policy uncertainty effects under different ownership structures: An asymmetric analysis," Finance Research Letters, Elsevier, vol. 91(C).
    15. Liang, Zhentang & Liang, Xuedong & Wang, Wenju & Zhao, Yunying, 2025. "How digital transformation reduces stock Price crash risk: Unpacking the roles of financing and efficiency," International Review of Financial Analysis, Elsevier, vol. 107(C).
    16. Li, Wenfeng & Wang, Shugang & Sun, Yao, 2026. "Do AI policy dividends alleviate employment pressure on college graduates? A comparative study across china provinces," Finance Research Letters, Elsevier, vol. 88(C).
    17. Li, Luxi & Ye, Qing & You, Jialu & Chen, Zhicheng, 2025. "Does AI mitigate climate risk and reduce the cost of capital? Evidence from firm-level data," International Review of Financial Analysis, Elsevier, vol. 108(PB).
    18. Jin, Longyun & Xu, Yida & Li, Mingyue, 2026. "Geoeconomic tensions and financial market responses in northeast Asia: Evidence from trade policy uncertainty," Finance Research Letters, Elsevier, vol. 90(C).
    19. Song, Qinyue & Han, Zhenfu & Shi, Zhengxin, 2026. "Financial mechanism of digital rural construction in promoting agricultural productivity and rural modernization," Finance Research Letters, Elsevier, vol. 92(C).
    20. Yu, Jungang & Ma, Xiaohua & Niu, Yanmei, 2025. "Judicial efficiency, corporate innovation investment, and financing efficiency," Finance Research Letters, Elsevier, vol. 86(PF).

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:102:y:2025:i:c:s105905602500526x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.