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

December 22, 2016

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Hui He, Nan Li, and Jing Fang. China’s Rising IQ (Innovation Quotient) and Growth: Firm-level Evidence, (USA: International Monetary Fund, 2016) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Capital productivity, Economic sectors, Financial institutions, Production, Productivity, Public enterprises, Stocks, Total factor productivity

Keywords: Capital productivity, China, Data combination, Growth, Innovation, Leverage ratio, Ownership status, Patent, Patent scope, Patent stock, Patenting firm, Production performance, Productivity, Public enterprises, R&D, SOE Reforms, State-owned enterprise, Stocks, Total factor productivity, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/249
Stock No:

WPIEA2016249
ISBN:

9781475563139
ISSN:

1018-5941

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