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China’s Rising IQ (Innovation Quotient) and Growth: Firm-level Evidence

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  • Ms. Nan Li
  • Hui He
  • Jing Fang

Abstract

This paper examines whether the rapid growing firm patenting activity in China is associated with real economic outcome by building a unique dataset uniting detailed firm balance sheet information with firm patent data for the period of 1998-2007. We find strong evidence that within-firm increases in patent stock are associated with increases in firm size, exports, and more interestingly, total factor productivity and new product revenue share. Event studies using first-time patentees as the treatment group and non-patenting firms selected based on Propensity-Score Matching method as the control group also demonstrate similar effects following initial patent application. We also find that although state-owned enterprises (SOEs) on average have lower level of productivity and are less innovative compared to their non-state-owned peers, increases in patent stock tend to be associated with higher productivity growth among SOEs, especially for patents with lower innovative content. The latter could reflect the preferential government policies enjoyed by SOEs.

Suggested Citation

  • Ms. Nan Li & Hui He & Jing Fang, 2016. "China’s Rising IQ (Innovation Quotient) and Growth: Firm-level Evidence," IMF Working Papers 2016/249, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2016/249
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    1. Shang-Jin Wei & Zhuan Xie & Xiaobo Zhang, 2017. "From "Made in China" to "Innovated in China": Necessity, Prospect, and Challenges," Journal of Economic Perspectives, American Economic Association, vol. 31(1), pages 49-70, Winter.
    2. Dai, Xiaoyong & Chapman, Gary, 2022. "R&D tax incentives and innovation: Examining the role of programme design in China," Technovation, Elsevier, vol. 113(C).
    3. Hsu, David H. & Hsu, Po-Hsuan & Zhao, Qifeng, 2021. "Rich on paper? Chinese firms’ academic publications, patents, and market value," Research Policy, Elsevier, vol. 50(9).
    4. Liu, Mengxiao & Wang, Luhang & Yi, Yimin, 2022. "Quality Innovation, Cost Innovation, Export, and Firm Productivity Evolution: Evidence from the Chinese Electronics Industry," MPRA Paper 113270, University Library of Munich, Germany.
    5. Dong, Baomin & Guo, Yibei & Hu, Xiaotian, 2022. "Intellectual property rights protection and export product quality: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 143-158.
    6. Yang, Mian & Hong, Yili & Yang, Fuxia, 2022. "The effects of Mandatory Energy Efficiency Policy on resource allocation efficiency: Evidence from Chinese industrial sector," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 513-524.

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