Strong Intellectual Property Protection Research Articles

Does enterprise digital transformation contribute to green innovation? Micro-level evidence from China

The synergy of digitalization and greening has emerged as a prominent means to achieve the goal of “carbon peaking and carbon neutrality”. Given its significant contribution to carbon emissions, the impact of digital transformation on green innovation in manufacturing enterprises remains a longstanding research hotspot. Therefore, based on the data from China A-share listed manufacturing companies spanning from 2007 to 2022, this paper empirically analyzes the influence and mechanism of digital transformation on green innovation. Our findings reveal that digital transformation can significantly promote green innovation in manufacturing enterprises, with a particularly pronounced effect on substantive green innovation. These conclusions withstand rigorous robustness tests. Mechanism analysis shows that digital transformation can facilitate green innovation by improving internal control quality and fostering industry-university-research cooperation. Moreover, our moderation analysis reveals that both equity incentives and compensation incentives strengthen the positive relationship between digital transformation and green innovation in manufacturing enterprises. Heterogeneity analysis proves that digital transformation exerts a more pronounced impact on green innovation of state-owned manufacturing enterprises, non-heavily polluted manufacturing enterprises, and enterprises located in regions with strong intellectual property protection. Furthermore, the transformation of digital underlying technologies is more conducive to fostering green innovation compared to practical application transformation. Subsequent investigation into the economic and social effects of green innovation indicates that it effectively reduces pollution emissions from manufacturing enterprises without compromising their development. Additionally, the emission reduction and income-generating effect resulting from digital transformation primarily manifest through substantive green innovation. This research expands upon the theory regarding the impact of digital transformation on green innovation in micro-manufacturing enterprises, providing empirical support for facilitating low-carbon transformations among manufacturing enterprises under the goal of “carbon peaking and carbon neutrality”.

Redefining global entrepreneurship: shifting focus from China to Central and Eastern Europe

Purpose The purpose of this paper is to explore the viability of shifting foreign direct investment (FDI) from China to Central and Eastern European (CEE) countries in light of recent geopolitical and economic challenges. By analyzing case studies, it argues that CEE nations offer a compelling alternative for Western European businesses, with stronger intellectual property protection, political stability and alignment with European Union (EU) sustainability goals. The paper provides insights for firms and policymakers on mitigating risks and enhancing business operations by pivoting toward the CEE region, offering practical recommendations for adapting to shifting global trade dynamics. Design/methodology/approach The design methodology uses the case study approach to analyze the shift of FDI from China to CEE. This method examines the geopolitical, economic and legal contexts influencing business decisions, using real-world examples of Western European companies that have made this transition. The case studies highlight key factors in decision-making and the benefits of relocating investments to the CEE region. Findings The study identifies several advantages of the CEE region over China for Western European firms. These include geographic proximity, similarities in business values and purposes, environmental accountability, trustworthiness in business, enforceable noncompetition rules, lower risks of counterfeiting, reduced political and administrative risks, lower risks of intellectual property theft and reduced risks of negative publicity. Practical implications The findings suggest that Western European firms should consider redirecting their FDI to the CEE region to mitigate risks associated with investing in China. This move could offer long-term benefits despite short-term complications. Originality/value This paper contributes to the FDI theoretical framework by enhancing the cultural, administrative, geographic and economic (CAGE) distance framework. It provides a unique perspective on the shifting dynamics between Europe and China and highlights the potential of the CEE region as a viable alternative for FDI.

“County-to-City Upgrading” Policy and Firm Innovation—Evidence from China

The “County-to-City Upgrading” policy represents a typical tool for central and local governments to promote the urbanization process through administrative empowerment. Do local governments’ policies promote innovation-driven high-quality and sustainable development? Under the context of the high-quality development of China’s economy, this paper examines the quantitative impact of the local governments’ “County-to-City Upgrading” policy on enterprises’ innovation. Using a staggered-DID model and the data from the Chinese Patent Database and the Industrial Enterprise Database from 2000 to 2013, the baseline results indicate that the policy not only increases the quantity of innovation but also improves the quality of innovation. The key findings of the research are the following: (1) The policy primarily promotes innovation activities among local enterprises through the cost reduction effect and resource accumulation effect. (2) The policy has a more significant impact on boosting innovation in the eastern regions as well as areas with stronger intellectual property protection. (3) The policy not only can advance technological and practical innovation but can also help enterprises overcome the problem of technological containment. (4) The policy has a prominent impact on green and low-carbon patents, which implies that it has become a significant drive pushing forward local green and sustainable development.

Does Tax Sharing Matter for Export Quality Upgrading? Evidence from China

Tax policy is critical for business operations and export decisions. However, the relationship between tax sharing and export has been less frequently discussed. This paper explicitly examines the underexplored tax-sharing system’s effect on manufacturing exporters’ export quality and develops four hypotheses. We use data on Chinese manufacturing exporters and prefecture-level tax-sharing from 2008 to 2013 and employ an instrumental variable approach to alleviate the endogeneity problem. The empirical evidence supports our hypotheses. We find that an increase in the prefecture-level government tax-sharing ratio significantly reduces export product quality of firms. This quality effect can occur through channels, including tax burden effect, production scale effect, and innovation effect. Moreover, more productive firms and those operated in cities with stronger intellectual property protection can face a smaller quality-reducing effect. Our findings offer policy implications for improving China’s modernized tax system and trade upgrading. Policymakers should recalibrate the tax-sharing system to reduce the tax burden on manufacturing exporters, particularly for innovative and high-productivity firms, and bolster intellectual property rights to enhance export quality and support China’s trade and economic modernization.

The effect of government informatization construction on corporate digital technology innovation: New evidence from China

AbstractThis study explores the impact of government informatization construction on corporate digital technology innovation. It uses the integration of informatization and industrialization pilot zones in China as a quasi‐natural experiment of government informatization construction, and construct a difference‐in‐differences model. Based on a sample of Chinese A‐share corporations from 2007 to 2021, the empirical findings reveal that government informatization construction significantly promotes corporate digital technology innovation by enhancing corporate attention to digital technologies and reducing transaction costs. Furthermore, the positive impact is more pronounced in the southern regions and regions with stronger intellectual property protection and high‐tech and digital economy industries, as well as mature‐stage corporations and corporations with higher levels of digital technology innovation. These findings provide valuable insights for implementing informatization policies and facilitating corporate digital technology innovation.

Corporate digitalization and green innovation: Evidence from textual analysis of firm annual reports and corporate green patent data in China

AbstractWe investigate the effect of corporate digitalization capabilities on green innovation among Chinese‐listed firms. Using a panel dataset of 2908 companies from 2011 to 2020, we use textual analysis and entropy weighting on corporate annual reports to construct a yearly corporate digitalization index. Our findings show that corporate digitalization promotes green innovation, as evidenced by patent applications and grants. This relationship is stronger for firms with fewer financial constraints and in provinces with strong intellectual property protection. We also find the national digital policy of the “Internet Plus” strategy has a stronger positive effect on corporate green innovation for corporations with a higher degree of digitalization. Our results are robust to various alternative measures, econometric models, and different samples.

International Patent Cooperation, Patent Prosecution Highway Agreements, and Export Product Quality

AbstractThis paper investigates how international cooperation for patent examination using Patent Prosecution Highway (PPH) agreements has affected the quality of firms' exports. Taking the PPH agreements signed between China and the export destinations as a quasi‐natural experiment, we established a difference‐in‐difference‐in‐differences model. We found that international cooperation for patent examination caused firms to increase export quality to PPH partners in patent‐intensive industries to a greater extent. This effect was more profound among PPH partners with stronger intellectual property protection, differentiated products and core products, and agreements along with the Patent Cooperation Treaty. We also found that PPH agreements increased the number of Chinese patent applications filed in PPH partners, patent applications by PPH partners in China, and the level of innovation, all of which constitute the major channels through which export quality to PPH partners increases. Our findings demonstrate that international patent cooperation has played an important role in promoting international trade quality.

On the relationship between protection of proprietary information and transparency of accounting information

This paper explores the interplay between proprietary information leakage, intellectual property protection, and accounting transparency using data from A-share listed manufacturing companies (2019–2021). Findings include: 1) Firms with a higher risk of R&D information leakage show less accounting transparency, as management seeks to protect proprietary information and uphold their interests. 2) In regions with strong intellectual property protection, the incentive for management to reduce accounting transparency to safeguard proprietary information intensifies. Intellectual property protection level significantly impacts corporate accounting information disclosure.

Digital transformation and greenwashing in environmental, social, and governance disclosure: Does investor attention matter?

AbstractGoverning greenwashing in environmental, social, and governance (ESG) disclosure is an important issue, but relevant literature is scant. Based on the data on Chinese A‐share listed firms from 2012 to 2021, we investigate the governance role of corporate digital transformation (DT) in ESG greenwashing and its influencing mechanism. We find that DT significantly inhibits ESG greenwashing. Moreover, DT mitigates ESG greenwashing by enhancing corporate green technology innovation (i.e., innovation channel), reducing information asymmetry (i.e., information channel), and increasing trade credit (i.e., resource channel). From the perspective of investor attention, we find that both retail investors' online opinions and institutional investors' site visits strengthen the inhibitory effect of DT on ESG greenwashing. Furthermore, such an inhibitory effect is more pronounced in large firms, industries with high competition, and regions with strong intellectual property protection. This research provides new insights and policy suggestions for governing corporate ESG greenwashing behavior.

Does enterprise digital transformation contribute to the carbon emission reduction? Micro-level evidence from China

Energy saving, emission reduction and low carbon development are the key contents to promote sustainable development in the world, which are also important paths to achieve China's "dual carbon" target on schedule. Especially in the wave of digital economy, the optimization of production mode brought about by the enterprise digital transformation is becoming an important driving force to reduce carbon emission intensity of enterprises. Based on the text analysis of 2012–2020 annual reports of Shanghai and Shenzhen A-share listed companies, we measure the level of enterprise digital transformation, and then empirically investigate the impact of enterprise digital transformation on carbon emission intensity and the mechanisms. We find that enterprise digital transformation can significantly reduce the carbon emission intensity by improving their ability of technological innovation, internal control and environmental information disclosure. And the results are robust after a series of robustness tests such as eliminating the endogeneity bias, replacing variables and limiting samples. Furthermore, heterogeneity analysis show that digital transformation has a stronger effect on the enterprises which located in the regions with strong intellectual property protection and the capital intensive enterprises, but there is no heterogeneity in the types of enterprises, in the intensity of environmental regulation of enterprises and in the information infrastructure construction of enterprises. Under the background of digitization, this paper discusses the path choices for enterprises to reduce carbon emissions, which provides references for enterprises to grasp the opportunities in the new tide of scientific and technological revolution and green economic transition.

Technological radicalness, R&D internationalization, and the moderating effect of intellectual property protection

Drawing on insights from the resource-based view of the firm, this paper examines the link between the radicalness of the firm's technologies and the extent of its exploitation and exploration R&D activities abroad, with an additional focus on the level of the host country's intellectual property (IP) protection as a force moderating this link. It uses information about greenfield foreign direct investment by 185 U.S. publicly-traded manufacturing firms in the period 2003–2013 to demonstrate that technological radicalness is positively associated with the number of exploration and exploitation R&D projects. While the level of IP protection is shown to have a moderating effect, this is nuanced: firms with more radical technologies pursue more exploration R&D projects in countries with stronger IP protection; in turn, the number of exploitation R&D projects is driven by those undertaken in countries with weaker IP protection. The findings have both managerial and policy implications.

Does banking competition stimulate regional innovation? Evidence from China

The evidence regarding the impact of banking competition on innovation activities is mixed in developed countries. China's bank sector is unique and controlled by the government. Scholars currently have a limited understanding of how banking competition affect innovation in developing countries with the different bank system. To help fill this gap, using Chinese prefecture-level cities from 2007 to 2018, this paper investigates the effect of banking competition on regional innovation.11A prefecture-level city is an administrative division that ranks below a province and above a county in China's administrative structure. Specifically, a prefecture is larger than a “city” in the usual sense of the word, namely, a continuous urban settlement. It is an administrative unit comprised of a main central urban area and the greater surrounding rural area, and many small cities, towns, and villages fall into this category (Fang et al.,2017).We find that banking competition significantly stimulates regional innovation. This finding remains unchanged after a series of robustness tests and is more prominent for regions in eastern China and for regions with strong intellectual property protection. In addition, banking competition has a positive effect on invention innovation, utility model innovation, and design innovation. Furthermore, we find that banking competition promotes regional innovation by increasing the supply of credit. Our research findings support the view that banking competition promotes innovation. To stimulate regional innovation, the government can consider deregulating bank control and strengthening intellectual property protection.

Analyst Forecast Optimism and Corporate Innovation: An Institution-based View

This paper investigates the influence of analyst forecasts on firm innovation from behavioral and institutional perspectives. We argue that optimistic analyst revenue forecasts raise firm expectation on feasibility and effectiveness of implementing an innovation strategy, thus prompt firms to invest more in innovation. We also posit that subnational differences in institutional environment in terms of factor market development, intellectual property rights protections, and government corruption all affect firm perception on return on innovation, and consequently moderate firm decision to invest in innovation. These hypotheses are tested using a longitudinal sample of Chinese listed firms between 2003 and 2017. We document that optimistic analyst revenue forecasts increase firm R&D investment intensity. This relationship is stronger when forecast dispersion is small, when firms are in regions with more advanced factor markets, stronger intellectual property protection, and less corrupted government.

China’s New Environmental Protection Law and Green Innovation: Evidence from Prefecture-Level Cities

This paper examines the impact of China’s new environmental protection law on green innovation. Using a large sample of Chinese prefecture-level cities for the 2010–2016 period and the difference-in-differences (DID) methodology, we provide strong evidence that the new environmental protection law promotes green innovation. This finding is robust to a battery of sensitivity tests. The micromechanism analysis shows that the new environmental protection law can promote green innovation by imposing stricter financial constraints on enterprises in high-pollution industries and increasing their incentives for green innovation to meet green credit requirements. Further, we find that the impact of the new environmental protection law on green innovation is more prominent in prefecture-level cities with a lower level of banking competition and for prefecture-level cities with stronger intellectual property protection. Overall, these findings suggest that the new environmental protection law has played an important role in promoting green innovation in China. To improve the effect of the new environmental protection law on green innovation, the government can consider lowering banking competition and strengthening intellectual property protection.

Informal and formal open activities: Innovation protection methods as antecedents and innovation outputs as consequences

Firms’ open strategies are tied to their innovation protection mechanisms. Extant theoretical and empirical research provides valuable insights, which generally conclude that stronger intellectual property protection is likely to be associated with increased openness. However, current research still has a limited understanding of the relationship between the choice of protection mechanisms and the mode of openness. We propose that firms adopt different modes of open activities when they choose corresponding effective protection mechanisms. We further investigate how these open activities affect innovation output and whether the impact of open activities on innovation output is contingent on innovation types. The empirical results from 1,202 firms in the IRC Open Innovation Survey show that firms pursue formal open activities when they incorporate legal methods to protect innovation. In contrast, firms pursue informal open activities when they incorporate strategic methods to protect innovation. We further find that formal open activities favor incremental innovation, while informal open activities favor radical one.

Cross-Border Technology Investments in Recessions

Utilizing industry-level foreign direct investment (FDI) from 72 source markets to 122 destination markets between 2003 to 2018, we apply a differences-in-differences approach to evaluate the response of technology FDI to recessions. We find that research and development (R&D) intensive FDI drops when the destination market is in recession and the source market is in a normal state, and recovers to the pre-recession levels when both destination and source markets are in recession. The result is particularly pronounced in deep and long recessions, during the propagation stage of recessions, and in destination markets with stronger intellectual property protection, looser FDI regulation, and higher financial development. These recession impacts are limited to R&D intensive FDI between advanced markets: there is no evidence that R&D intensive FDI from or to emerging markets respond to either destination or source market recessions.

Intellectual Property and Foreign Direct Investment

With help from both domestic and international markets, ASEAN countries are able to catch-up withthe latest economic development if they can sustain high economic growth for a long-period of time. To doso, the resources available in countries such as capital and labors should fully be utilized up to theoptimum level. The capital itself can be in many forms such as investment. Since most of the ASEANcountries are categorized as developing countries, the reliance on foreign direct investment (FDI) as asource of growth is highly needed as it helps the economy to step on a higher stage of economic developmentvia the roles of foreign experts and technological transfer. In ensuring a higher level of investment, there isa need to ensure a high level of intellectual property protection since it assists in promoting invention,innovation and new business development. In opposite, lacking in protection might discourage foreigninvestors to invest in the countries, thus limiting the ability of the countries to grow further. Therefore, theaim of this paper is to examine whether strong intellectual property protection will really help in attractingmore foreign investors to invest in ASEAN-5 countries. Using annual data from 2007 to 2016, panel dataestimation using random effect is employed. It was found that the ASEAN-5 countries should strengthentheir intellectual property protection in order to stimulate higher foreign investments. Nevertheless, inbetween copyright and patents, copyrights protection gives significant effect to the FDI inflows relative tothe latter one. It indicates that the countries are slowly moving out from the production-based economy andcatching-up towards a digital economy.
 Keywords: ASEAN-5, foreign direct investment, intellectual property protection, digital economy, copyrights

Synergetics of Enterprise Innovation Systems Based on a Three-Variable Oscillation Reaction

In this paper, we proposed a mathematical analysis model of the enterprise innovation system according to the theory of synergetics and based on a three-variable chemical oscillation model. The three variables-innovation capability status, resource investment status and innovation support status-are used metaphorically as the main reaction variables in the oscillation reaction. Through the simulation, in which the fourth-order Runge-Kutta algorithm was utilized and realized by the software MATLAB, the co-evolutionary characteristics of enterprise innovation systems were studied. We conclude that the degree of protection of intellectual property rights has a critical impact on the enterprise innovation system: overly strong or weak intellectual property protection is not conducive to enterprise innovation. Only when intellectual property protection is within a reasonable range can it promote the evolution of the enterprise innovation system to the collaborative state.

Patent as a Quality Signal in Entrepreneurial Finance: A Look Beneath the Surface

AbstractWe examine the value of patents on Chinese firms’ access to venture capital (VC). We find that the patent applications (grants) of firms significantly increase their likelihood of obtaining VC funding in the following year(s), particularly for high‐quality patents in high‐tech industries. Depending on investment, patent quantity significantly improves the size of VC investment and firm valuation. This effect is pronounced in first‐round investment, strong intellectual property protection regions, during periods of loose monetary policy, and state/corporate VC. Overall, we support the use of patent as a quality signal in attracting entrepreneurial finance outside the US and warrant the conditions it holds.

Organize to Innovate: Intellectual Property Regimes, Technology Adoption and Firm Structure

We use The Patents (Amendment) Act, 2002 in India as a quasi-natural experiment to identify the causal effect of higher incentives for innovation on a firm's compensation structure. We find that stronger intellectual property (IP) protection has a sharper impact on the demand for managerial skill for technologically advanced firms. Firms that were apriori above the industry median (in terms of technology adoption) see a rise in the share of managerial compensation by 1.3-8.3% higher than the rest. This effect is completely driven by the firms between 60th-90th percentile. The increase in wage inequality can partly be attributed to a stronger performance pay for high-tech firms. Associatedly, the reform also leads to a significant reallocation of resources between firms. The high-tech firms invested more in technology adoption, started to produce more product varieties at higher quality and filed for more product patent claims. Broadly, we demonstrate that stronger IP protection leads to higher wage inequality between firms.