Cracking down on the infringement and counterfeiting: Intellectual property rights and corporate innovation in China

Abstract

This study examines the impact of infringement and counterfeiting on the performance of corporate innovation. We use a quasi-natural experiment to examine the effects of the Chinese government's crackdown on intellectual property rights infringement and counterfeiting. We find that after the implementation, patent counts and citations significantly increased for companies in industries with a high risk of intellectual property violations or imitation by competitors, especially for financially strong and risk-taking firms. The event leads to more R&D investment and firms also prioritize invention patents over utility patents.