Innovation and financial performance: An assessment of patenting strategies of Chinese listed firms

We examine the impacts of explorative and collaborative innovations on financial performance within the potential‐outcome framework using the patent information of 1716 Chinese listed firms over 2009–2017. By identifying the firms' patenting strategies on the basis of their positioning in the matrix of exploitative‐explorative by solitary‐collaborative dichotomies, as opposed to the separate dichotomies used in the existing studies, we obtain evidence for the impacts that are new to the literature. Firstly, the relationships between the shares of explorative and collaborative innovations and the performance are at most U shaped and only observed in firms pursuing some specific patenting strategies. Furthermore, the thresholds that permit these firms to benefit from the improvement of financial performance through increasing the shares of explorative and collaborative innovations are at least as high as 63%. Secondly, the patenting strategies in the extremes of the exploitative‐explorative and solitary‐collaborative dichotomies, such as the solitarily exploitative patenting and the collaboratively explorative patenting, have a greater value‐enhancing potential than those falling between the extremes of the dichotomies, failing to support the proposition that firms adopting an innovation strategy balancing between exploitation and exploration have better financial performance in the long run.