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      Intellectual Property Rights Protection, Ownership, and Innovation: Evidence from China
      21 Nov 2016Working Paper Summaries

      Intellectual Property Rights Protection, Ownership, and Innovation: Evidence from China

      by Lily Fang, Josh Lerner, and Chaopeng Wu
      As China’s top leaders promote innovation as the key to the country’s sustained economic growth, the extent to which the state can drive innovation without sound institutions and economic incentives remains in question. The evidence in this study of innovation and intellectual property rights (IPR) protection strongly supports the view that effective economic institutions matter, even in China. In order to successfully transition the country from a development model dependent on cheap labor and physical investments to one that is innovation-driven, these results suggest that the role of the private sector will be crucial. Private firms are more innovative both in terms of quantity and quality of patents, and are more so in cities with strong IPR protection.
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      Author Abstract

      Using a difference-in-difference approach, we study how intellectual property right (IPR) protection affects innovation in China in the years around the privatizations of state-owned enterprises (SOEs). Innovation increases after SOE privatizations, and this increase is larger in cities with strong IPR protection. Our results support theoretical arguments that IPR protection strengthens firms’ incentives to innovate and that private sector firms are more sensitive to IPR protection than SOEs.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: September 2016
      • HBS Working Paper Number: NBER Working Paper Series, No. 22685
      • Faculty Unit(s): Finance; Entrepreneurial Management
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      Josh Lerner
      Josh Lerner
      Jacob H. Schiff Professor of Investment Banking
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