patent premium我的资源To Quzhe 20170311

1. IntroductionNowadays, in order to keep sustainable competitiveness, it is crucial for firms to enhance their innovation capability and therefore firms put unprecedented emphasis on Research and Development (R&D) activities. When they come up with a valuable innovation, there tends to be different viable methods to protect it, which can generally be divided into two types: formal intellectual property (IP) protection such as patent, trademark, and copyright; and alternative or informal IP protection methods such as trade secret, lead time to market etc. (Hall et al., 2014). As one of the most common methods, patenting is believed to provide effective protection for firms innovations in many cases, hence importance of patenting has been addressed widely over decades and has contributed to the strengthening of patent protection and subsequently patenting boom in many countries (Kortum and Lerner, 1999; Hu and Jefferson, 2009). To quantify the effect of patent on innovation in the US industries, Arora et al. (2008) employed a structural model to estimate the proportional increment in the value of innovation due to patent protection. They defined the value increment as patent premium and found that firms that patented innovations are expected to earn almost 50 percent more on average than if they had not patented those innovations. In this study, we follow the above definition and use patent premium to quantify the value increment of innovations due to patent protection.When further exploring the question of patent premium, we find that it becomes extremely intriguing in the context of emerging economies such as China and India. As the world economy became increasingly integrated, Multinational Corporations are motivated to locate their research and development (R&D) activities in emerging economies as a means of rebalancing their global footprint, lowering R&D costs and operating close to their markets and suppliers. This trend dovetails with the growth of indigenous R&D activities in the emerging economies. As a result, more and more inventive activities take place in emerging economies, beyond the traditionally innovative triadic regions of Europe, Japan, and the United States. A remarkable characteristic of the emerging economies is that in these countries the intellectual property rights (IPR) protection is weak. Thus the opportunity cost of patenting there may be higher than that in Europe, Japan and the United States and patent premium in the emerging economies can be fairly modest. This reasoning is confirmed by Keupp et al. (2012), who conducted an in-depth case study on the motivations of 11 foreign firms for patenting in China. Some of these firms encountered serious infringements and sometimes the infringements can occur on a weekly basis. Nevertheless, it seems to be paradoxical that despite the weak IPR protection and possibly low patent premium in China, patenting activities have surged in China in the last ten years or so. As demonstrated in Figure 1, the number of invention patent applications received by the State Intellectual Property Office of China (SIPO) increased from 63,000 in 2001 to 1.1 million in 2015, representing a staggering 17-fold increase. China surpassed the US in 2011 to become the country receiving the most invention patent applications in the world. Even when the invention patent applications filed in the SIPO amounted to 928,000 in 2014, the number still increased nearly 20 percent to reach 1.1 million in 2015. Both foreign firms and domestic firms contributed to this trend. Figure 2 shows that the number of foreign patent applications in China grew at averagely 12 percent annually during 20002014. This research aims to investigate whether it pays to file patents in Chinese high technology (high-tech) industries by quantifying patent premium of domestic firms and foreign firms. There are two different situations considered here. The first situation (a) is that a non-patenting firm starts to apply for patents. The second situation (b) is that a patenting firm continues applying for more patents. Both two situations are analyzed in the study, because they reflect two different strategies: the former one is a decision on whether a firm should apply for patents given it has an innovation; the latter one is a decision on whether a firm should increase the number of its patents given that it has already had patents.Figure 1 Number of annual invention patent applications in emerging economiesFigure 2 Number of patents applied for by domestic and foreign applicants in China2. Literature review2.1. Corporate innovation protection strategyWe draw on resource-based view and competitive advantage theory to explain the patent premium that local firms and foreign firms can obtain in countries with weak IPR protection. The resource-based view considers firms as bundles of heterogeneous resources that include tangible and intangible assets, operational processes, and products (Amit and Schoemaker, 1993). A focal firm, i.e. the firm under study, can achieve superior performance and build up its competitive advantage over its rivals through its unique resources. However, rival firms may gradually erode a focal firms competitive advantage if they possess similar resources and use them to compete with the focal firm. Sustainability of the focal firms competitive advantage will therefore be determined by whether rival firms are able to imitate the focal firms and accumulate the same key resources and whether the focal firm can create barriers to such imitation. Because of the monopoly nature of patent, it can be used by firms as a key resource to achieve competitive advantage (Teece, 1986; Hall, 1992). However, rival firms can invent around a focal firms patents and thus compromise the uniqueness of the focal firms resource, that is, its patents. Moreover, in so-called complex product industries such as electronics and semi-conductor, a new and commercializable product or process is comprised of numerous separately patentable elements; hence rival firms may hold patents that are necessary for the focal firm to produce and sell its products. Therefore, firms have to make strategic decisions in the course of patenting because returns on the investment in patenting activities (patent premium) are not only determined by the value of the underlying innovations, but also by the extent to which the patents can render competitive advantage to the firms.The strategies that a firm uses to create barriers to imitation are known as “isolating mechanisms”. Isolating mechanisms are associated with corporate culture, managerial capabilities, information asymmetries and intellectual property rights such as patents (Lippman and Rumelt, 1982; Dierickx and Cool, 1989; Reed and DeFillippi, 1990). A competitor can enter a market with powerful resource that may invalidate the incumbent firms competitive advantage (Barney, 1986). In response, incumbent firms can strengthen their existing resources and develop new resources to cope with the competition brought by entrants (Chaharbaghi and Lynch, 1999). Because patent has both entry-deterring and entry-promoting effects, incumbent firms can harvest greater patent premium by patenting more aggressively than before. Entrants can also patent actively to build up their competitive advantage against the monopoly power that incumbent firms obtain through their patent portfolios (Cockburn and MacGarvie, 2011).In emerging economies, foreign firms face fierce competition from local firms. Local firms can absorb technological spillovers from foreign firms to improve their own technological capabilities, aiming to offer high value-added products or services. Local firms may also imitate foreign firms products and services to launch their own ones with incremental innovations. Local firms patenting activities can challenge foreign firms leading position and reduce the value of foreign firms patents if local firms patents and foreign firms overlap in scope. On the other hand, local firms patenting activities may stimulate foreign firms to seek more patents than otherwise to fend off stiff competition, which would enhance patent premium of foreign firms. Hu et al. (2010) argued that foreign patenting surge in China has largely been driven by the competitive threat motive such as strategic preemption and blocking of competition rather than covering market. It thus follows that the premium of patenting activities is contingent on the patenting activities of competitors.2.2. Impact of patenting on firms performanceThe studies on impact of patenting activities on firms performance measure performance through indicators such as market value, sales growth and productivity. Austin (1993) studied impact of patent events on firms market value in American biotechnology industry, and found in terms of private returns, patents readily identifiable with end products tend to be more valuable than the average patent. Ernst (1999) examined the relationship between patent applications and subsequent changes of company performance. He proved that German patent applications lead to sales increases with a time-lag of two to three years after the priority year, while European patent applications, which are of higher quality than national patent applications, have an even higher impact on sales increases with a lag of three years after the priority year. Bloom et al. (2002) argued that patents have an economically and statistically significant impact on firm-level productivity and market value after analyzing 200 major British firms. While patenting feeds into market values immediately, it appears to have a delayed effect on productivity. This generates valuable real options because patents provide firms with the exclusive rights to their new technologies. They can have the option to wait until making these sunk costs investments. Besides, higher market uncertainty, which increases the value of real options, reduces the impact of patents on productivity. In this study, we use the productivity indicator to measure the corporate performance.As reviewed above, most of the studies investigated the research question only in developed economies, i.e. well-developed appropriability regime. To our best knowledge, there has not been any large-scale firm-level study that investigates the cost and benefit of patenting activities in emerging economies with weak IPR protection (for example, China). 3. Descriptive analysis of high-tech firms3.1. Construction of datasetOur data set is composed of two databases. One is Chinas National Bureau of Statistics Annual Survey of Industrial Enterprises (ASIE), which is a census of all non-state owned firms with more than RMB five million in revenue and all state-owned firms in China, covering ten years from 1998 to 2007. The dataset contains more than 50 firm-level statistical indicators, including input, output, R&D expenditure, capital composition, employment, geographical location, the industry (at four-digit industrial classification level) in which a firm operates, ownership status, and assets and liabilities. The other database is the China Patent Abstract Database (CPAD). It includes over four million patent applications submitted by domestic and foreign applicants to the SIPO from 1985, when the patent system in China was established, till 2009. The information provided in the database on each patent includes patent application and publication number, application and publication date, patent number, title, International Patent Classification class, abstract, claims, legal status, and so on.We linked the two databases together through firm names in Chinese to obtain a novel firm-patent dataset. Our method achieves more comprehensive coverage and accurate linkage between firms and patents than other research team (Eberhardt et al, 2012) does. This is because, first of all, we linked names which are all in Chinese. Eberhardt et al. linked the ASIE in Chinese and the European Patent Offices PATSTAT database in English through a bridging database Oriana of Bureau Van Dijk. As Eberhardt et al. documented, the Chinese firm names in the PATSTAT were either Chinese characters, or Latin alphabet from pinyin transcription, or English names translated from the Chinese ones, or any combination of the three. Our method improves accuracy by linking names which are all in Chinese in the sense that we avoided errors resulting from linking names in Chinese, Latin alphabet or English. Second, only 23,000 firms are included in the Oriana database, which are about one tenth of the total firms in the ASIE. The best efforts by Eberhardt et al. can only establish 10 percent of all possible linkages.3.2. Overview of firms in high-tech industryl Basic informationFrom the ASIE we finally selected all the 34,589 firms in Chinas high technology industries, consisting of the pharmaceutical, aviation, information and communication technology, precision instruments and office machinery industry, and medical equipment and instruments and so on, which was defined by the National Bureau of Statistics of China (2002). The detailed coverage of four-digit industry sector is presented in Table A1 in the appendix. Number of above scale firms in high-tech industries grows stably over the decade from 9,272 in 1998 to 21,791 in 2007, as shown in Figure 3.We divide firms into three categories by funding source, namely from mainland of China, from Hong Kong, Macau, and Taiwan (hereafter HKMT) and from foreign countries except for HKMT (hereafter non-HKMT), whose distribution is illustrated in Figure 5. In the following analysis, HKMT firms and non-HKMT firms together are also referred to as “foreign firms”. Most firms in our sample are domestic firms, accounting for 67 percent of total firms. For foreign firms, HKMT firms and non-HKMT firms are close in number, accounting for 15 percent and 18 percent respectively.Figure 3 Number of above-scale firms in high-tech industriesAs shown in Figure 4, firms that operate in information and communication technology account for more than half of our sampling firms. It is followed by pharmaceutical firms and general instrument firms.For the whole sample, Figure 6 shows that mean number of employees in 2007 is 390, while more than three quarters of firms have below-average number of employees. Median number of employees is 121.For different types firms, based on the medians, HKMT firm and non-HKMT firms have similar number of employees, while domestic firms hire the least number of employees in 2007, which is shown in Figure 7. Overall, number of employees of domestic firms appears to have the least variation, while non-HKMT firms vary more in terms of number of employees.Figure 4 Industrial distribution of high-tech firmsFigure 5 Distribution of different types of high-tech firmsFigure 6 Distribution of number of employees for the whole sample in 2007(Base unit: 1 person)Note: The line in the blue box indicates the value of median. The upper and lower bounds of the box represent the 25th and 75th percentile, respectively. The blue box represents the middle 50 percent of observations (25 percent of values below and above the Median). The ends of the whiskers (lines extending vertically from the boxes) represent the minimum and maximum of all observations after excluding outliers (observations deviating from the mean by more than three times the standard deviation). “” indicates the mean value of all data. For all box plots in the report, we do not present outliers.Figure 7 Distribution of number of employees for different types of high-tech firms in 2007As demonstrated in Figure 8, sales revenue of high-tech firms is highly skewed, which indicates that only a small fraction of firms can gain high sales revenue. The median sale revenue in 2007 is 31.06 million RMB.Figure 8 Distribution of sales revenue for the whole sampleNote: The mean value is higher than the largest value because there exist outliers that have not been presented in the box plot. For different types of high-tech firms, we can find that based on both the median value and mean value, sales revenue of foreign firms (including HKMT and non-HKMT firms) is higher than that of domestic firms. Sale revenue of domestic firms shows the least variation as illustrated in Figure 9.Figure 9 Distribution of sales revenue of high-tech firms in different typel R&D and patenting activitiesTo investigate innovation activities of high-tech firms, we firstly look at the input side: level of R&D investment. Since R&D intensity is the most frequently used measure to gauge the relative importance of R&D across industries and among firms in the same industry, we firstly calculate R&D intensity of different industries, which is defined as the total R&D expenditure divided by the total sales revenue of firms in the industry. As shown in Figure 10, firms in medical apparatus and equipment industry conduct R&D most intensively, which are followed by firms in spacecraft and aircraft industry. R&D intensity of pharmaceutical industry and general instrument industry is also relatively high.R&D intensity of different types of firms is compared in Figure 11. In general, R&D intensity of domestic firms is higher than that of HKMT firms and non-HKMT firms in all industries. Specifically, within medical apparatus and equipment industry, R&D intensity of non-HKMT firms is close to the level of domestic firms, and is much higher than that of HKMT firms. Non-HKMT firms in pharmaceutical industry and general instrument industry also invest R&D more aggressively than non-HKMT firms in other industries do.Figure 10 R&D intensity across industriesNot