The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
This paper examines whether the rapid growing firm patenting activity in China is associated
with real economic outcome by building a unique dataset uniting detailed firm balance sheet
information with firm patent data for the period of 1998-2007. We find strong evidence that
within-firm increases in patent stock are associated with increases in firm size, exports, and
more interestingly, total factor productivity and new product revenue share. Event studies
using first-time patentees as the treatment group and non-patenting firms selected based on
Propensity-Score Matching method as the control group also demonstrate similar effects
following initial patent application. We also find that although state-owned enterprises
(SOEs) on average have lower level of productivity and are less innovative compared to their
non-state-owned peers, increases in patent stock tend to be associated with higher
productivity growth among SOEs, especially for patents with lower innovative content. The
latter could reflect the preferential government policies enjoyed by SOEs.