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

IMF Working Papers, December 22, 2016

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

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Bibliographic details

• Authors: Hui He, Nan Li, Jing Fang
• Published: December 22, 2016
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781475563139.001

Summary and central question

• This paper examines whether the rapid growing firm patenting activity in China is associated with real economic outcomes by building a unique dataset uniting detailed firm balance sheet information with firm patent data for the period of 1998-2007.
• Authors: Hui He, Nan Li, Jing Fang
• Date: December 22, 2016

Key empirical findings

• Within-firm increases in patent stock are associated with increases in:
  • firm size
  • exports
  • total factor productivity
  • new product revenue share
• Event-study evidence:
  • First-time patentees are used as the treatment group.
  • Non-patenting firms selected based on Propensity-Score Matching method are used as the control group.
  • These event studies demonstrate similar positive effects following initial patent application.
• State-owned enterprises (SOEs):
  • On average have lower levels 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 stronger association for SOEs could reflect preferential government policies enjoyed by SOEs.

Methodology and data

• Time period covered: 1998-2007
• Dataset: Combination of detailed firm balance sheet information with firm patent data.
• Empirical approaches:
  • Within-firm panel analysis linking patent stock changes to firm outcomes.
  • Event studies using first-time patentees and Propensity-Score Matching to construct controls.

Subjects and keywords (as listed)

• 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

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• China’s Rising IQ
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