Abstract
The conventional wisdom is that state ownership may hinder patenting through reduced incentives and pronounced agency problems associated with state-owned enterprises (SOEs). Empirical evidence from a variety of contexts, including the U.S., Europe, and China, is consistent with this view, including evidence that shows that reductions in state ownership are associated with an increase in patent counts. In this paper, we investigate the innovative efficiency of Chinese SOEs. Innovative efficiency refers to patents/R&D expenditure, and not patent counts. The data indicate that SOEs, and especially central government SOEs, are substantially more innovatively efficient than non-SOEs. The relative innovative efficiency of SOEs is more pronounced amongst firms with high financial constraints, those removed from financial centers, and those in high-technology industries. The data are consistent with the view that in the Chinese context, there are favorable benefits to state ownership through access to talent, connections, and technological resources that enables a sustained commitment to R&D to enable efficient patent outcomes relative to R&D expenditure.
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