A political perspective of Chinese small-and-medium-sized firm’s foreign patent application

Abstract

Current patent literature focused mainly on the market value of firms’ patents but paid less attention to the patent’s role in firms’ non-market strategy. Invoking the political perspective, we argue when the government raises the patenting into the national strategy in a transitioning economy, the following implementation policy can promote firms to file more patent applications to gain political legitimacy from the government. Such effect becomes more salient when firms lack political legitimacy. Further, political legitimacy embedded in firms’ patent applications can help firms access the bank loan. Such outcome becomes stronger in the regions where the government has more control over the local bank system. We find empirical support for these arguments by examining the effect of a policy to implement a national strategy of intellectual property right on the Chinese firm’s foreign patent applications. Our results provide insights into the patent literature.