Abstract
ABSTRACT Patent insurance protects innovation and appropriability by reducing patent litigation costs. However, whether patent insurance promotes incremental or breakthrough innovation has not been solved. Taking China’s patent insurance pilot cities as a quasi-natural experiment, we evaluate how patent insurance influences innovation trajectory using firm-level data from 2008 to 2017. The results show that being located in patent insurance pilot cities promotes incremental innovation. The patent insurance subsidy of the local government positively moderates the effect of patent insurance on incremental innovation. Heterogeneity results show that patent insurance strongly promotes incremental innovation for state-owned enterprises and enterprises with litigation experience. The results are robust and provide policy implications for China’s patent insurance.
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