Abstract
International openness can affect regional innovation through more export opportunities, enhanced import competition and the spillover effects of foreign direct investment. Many studies have been conducted based on different countries for capturing the determinants of regional innovation, but very little literature is available with contradictory findings for the case of China. Based on 19 years’ panel data of 31 Chinese provinces, this paper analyzes the impact of international openness on regional innovation measured by the number of patent grants. The positive effects of overall trade and a higher proportion of exports and imports to GDP are significant and robust across different model specifications, indicating that an increase in international openness can promote regional innovating activities in China. The causal relationship of all the variables depicted by path analysis matches the results of the system GMM model. Higher intellectual property protection provides each region with the opportunity to obtain economic benefits from innovation and then make a higher investment in R&D activities. Besides, the lag effect of regional innovation capability can also explain a large part of local innovating activities. In our subsample regressions, the positive effect of trade openness on innovation is majorly manifested in developed areas like eastern provinces.
Highlights
Intellectual property is protected under the legislation, such as patents, copyrights and trademarks, which allow individuals to gain recognition or to benefit financially from what they invent or create [1]
In the system GMM model in column (3), the magnitudes of the effect of trade openness become lower: a 1-unit increase in trade openness and Intellectual Property Rights (IPRs) protection can result in a 0.15% and 3.83% increase in the number of invention patent grants
This is because 84.4% of the fluctuation in the number of invention patent grants can be explained by the lag effect of regional innovation capacity
Summary
Intellectual property is protected under the legislation, such as patents, copyrights and trademarks, which allow individuals to gain recognition or to benefit financially from what they invent or create [1]. The results show that overall trade openness, export and import have a significantly positive impact on the number of invention patent grants Such econometric specifications may suffer from severe endogeneity problems, given the fact that international openness and innovation are essential determinants of each other [8,9]. In the GMM model, IPR variables have positive and significant coefficients and this indicates that higher IPR protection grants local firms the opportunity to obtain the economic rents of innovation and make a higher investment in R&D activities. Attempts to test the impact of international openness and IPR protection on innovation by considering specific provincial-level conditions empirically are rare This can be an important research gap because regional differences are considerably huge in economic development, IPR protection, R&D investments and research personnel. The rest of this paper is organized as follows: Section 2 reviews previous studies related to the impact of international openness and IPR protection on innovation; section 3 describes the data source and model specification; section 4 presents the empirical findings and analysis; section 5 concludes
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