patent premium我的资源Patent Premium theory_CH

Patent Premium of Foreign Firms Innovating in Weak IPR Emerging MarketsAbstractThe weak intellectual property rights (IPR) protection in emerging markets pose a critical challenge for foreign firms attempting to appropriate returns from innovation in these markets. This study investigates to what extent, if at all, foreign firms in emerging markets obtain patent premium, defined as incremental productivity gains from a firms patents compared with its productivity had the firm not owned any patents. Drawing on theoretical insights from the institutional logic and the appropriability logic, and using a panel data set ten-year period of 32,901 firms in Chinas high-tech industries, we identify find that foreign firms do obtain patent premium despite the weak IPR protection in the country. Among foreign firms, the level of patent premium is significantly lower for international joint ventures than for wholly owned foreign subsidiaries. We also find that foreign firms obtain lower patent premium than domestic firms. These findings offer useful implications to foreign firms regarding their innovation strategies in weak IPR emerging markets and to host country governments in making their innovation policies. Keywords: Patent premium, IPR, innovation, institutions, emerging economyINTRODUCTIONIt has been a big paradoxical question to both scholars and executives alike for some time: Can innovation and patents pay off for foreign firms competing in large emerging markets where market opportunities are enormous yet intellectual property rights (IPR) protection is rather limited? The last decade has witnessed a surge of innovation activities of multinational enterprises (MNEs) competing in foreign emerging markets (Qu, Huang, Zhang, & Zhao, 2013; Thursby & Thursby, 2006; Zhao, 2006). Nevertheless, patent applications in emerging markets have been growing steadily in recent decades. Patent statistics reveals that the number of invention patent applications received by the National Intellectual Property Administration of China (CNIPA), for instance, increased from 63,000 in 2001 to 1.3 million in 2016, producing a staggering 21-fold growth. Domestic and foreign applications for invention patents in the nation have both been growing at an annual average rate of 21% in the period of 1986-2015 (Hu, 2010; Hu & Jefferson, 2009), with the fact that China surpassed the US since 2011 becoming the worlds biggest country in receiving patent applications.However, the weak IPR protection there pose a critical challenge for MNEs attempting to appropriate returns from patenting. The appropriation literature asserts that patenting may not be viable in countries where law enforcement for IPR is weak (Al-Aali & Teece, 2013) because the effectiveness of patenting primarily depends on the quality of national law system and institutional environment in which firms operate (Schankerman, 1998; Somaya, 2012). In such cases, innovators must count on other appropriation mechanisms, such as secrecy, control of complementary resources, or taking an advantage of lead time (“first to market”) to capture value from innovations (Al-Aali & Teece, 2013). Nevertheless, patent applications in emerging markets have been growing steadily in recent decades. Patent statistics reveals that the number of invention patent applications received by the National Intellectual Property Administration of China (CNIPA), for instance, increased from 63,000 in 2001 to 1.3 million in 2016, producing a staggering 21-fold growth. Domestic and foreign applications for invention patents in the nation have both been growing at an annual average rate of 21% in the period of 1986-2015 (Hu, 2010; Hu & Jefferson, 2009), with the fact that China surpassed the US since 2011 becoming the worlds biggest country in receiving patent applications.This phenomenon is striking considering the weak institutional environment and IPR protection in these economies (Brander, Cui, & Vertinsky, 2017; Peng, Ahlstrom, Carraher, & Shi, 2017). The appropriation literature asserts that patenting may not be viable in the emerging economies where law enforcement for IPR is weak (Al-Aali & Teece, 2013) because the effectiveness of patenting primarily depends on the quality of national law system and institutional environment in which firms operate (Schankerman, 1998; Somaya, 2012). In such cases, innovators must count on other appropriation mechanisms, such as secrecy, control of complementary resources, or taking an advantage of lead time (“first to market”) to capture value from innovations (Al-Aali & Teece, 2013). The weak IPR protection leads to weak incentives to patent and therefore poses a critical challenge for MNEs attempting to appropriate returns from patenting in emerging economies.Weak IPR system presumably leads to weak incentives to patent. This paradox has prompted researchers to investigate the conditions that are motivating the rapid growth of patenting in these countries (Hu, 2010; Hu & Jefferson, 2009; Keupp, Friesike, & von Zedtwitz, 2012; Li, 2012). It has been recognized that market size and economic advancement may offset some disincentives of patenting activities caused by weak IPR protection (Huang & Jacob, 2014), and governmental support for innovation (e.g., better financial and policy treatment) may cherish firm-level patenting activities despite the existence of patent infringement (Huang, 2017; Li, 2012). Others also suggest that improved physical infrastructure and geographic clusters for innovation are conduits of patenting undertaking (Hu & Mathews, 2005; Porter & Stern, 2001). Despite these scholarly efforts, it remains unanswered to what extent, if at all, patenting is valuable for foreign firms investing in large emerging markets characterized with weak IPR protection. Combining insights from the institutional logic and the appropriability logic, we aim to assess how valuable patenting is for foreign firms in such an important contextthese economies. We denote the value of patenting by patent premium, generally referring to increment to the value of technological innovations realized by patenting them (Arora, Ceccagnoli, & Cohen, 2008)Arora, 2008, R&D and the Patent Premium;Arora, 2008, R&D and the Patent PremiumArora, 2008, R&D and the Patent Premium;Jensen, 2011, Estimating the patent premium: Evidence from the Australian Inventor Survey, and specifically in this study connotes to incremental productivity gains from a firms patents compared with its productivity had the firm not owned any patents. The ideal method to estimate patent premium is to compare productivity of a patent-owning firm with its productivity had the firm not owned any patents, but the productivity of a patent-owing firm had it not owned any patents is hard to observe. In order to provide robust evidence, we employ a matching and difference-in-difference method on a large dataset of high-technology (high-tech) companies competing in China, the largest emerging market that features well with market opportunities and weak IPR protection in most sectors. We construct the dataset by matching the data from Chinas National Bureau of Statistics Annual Survey of Industrial Enterprises with the patent data from the National Intellectual Property Administration of China (CNIPA)Chinas State Intellectual Property Office (SIPO). The dataset covers 32,901 firms in Chinas high-tech industries (in which foreign firms actively operate) during a ten-year period of 1998-2007.Our longitudinal analysis offers some interesting and important insights. First, we find a significantly positive patent premium among foreign firms despite weak IPR system in China, validating the extensive patenting activities of foreign firms in the country. Second, this positive premium is not equally distributed across foreign firms of different ownership types. We find that wholly owned foreign subsidiaries (WOSs) gain higher patent premium than international joint ventures (IJVs), implying that MNEs full control of overseas decisions via WOSs can effectively reduce appropriability hazards risk whereas partial or shared control via of IJVs is likely to sufferresult in larger appropriability hazards. Third, domestic firms obtain higher patent premium than foreign firms, informing the disadvantage of foreign firms vis-vis their domestic peers in appropriating returns from patents and linking transforming technological innovation to productivity gains in emerging markets. From an academic standpoint, this study makes important contributions. To our best knowoeledge, it is the first to empirically assess patent premium in an emerging economy. Although conventional wisdom about appropriation in emerging economies argues that patenting is inadequate and alternative mechanisms should be adopted (Zhao, 2006, Keupp et al., 2009, Li, 2012), our findings demonstrate that patenting can be a valid appropriation mechanism and quite valuable in an emerging economy. This study also contributes to the patent premium literature by theorizing and estimating how patent premiums vary with ownership types of firms. We discover higher patent premium of domestic firms than foreign firms. This finding diverges from extant literature in the setting of a developed economy, which demonstrates that patents owned by foreign firms are typically more valuable than patents owned by domestic firms (Pakes et al., 1989, Lanjouw, 1992, Putnam, 1996). There is mixed evidence in Schankerman (1998)s study. This study also extends international business research on entry strategies, which has seldom pointed toby investigating the post-entry innovation implications我做了修改，但是不确信这么说是否准确。. Against this backdrop, we discover that WOSs generate greater patent premium than IJVs. THEORETICAL DEVELOPMENTPatenting under Weak IPR ProtectionPatenting has long been recognized as a differentiating mechanism, providing owners with the right to exclude others from using the invention without their permission for a limited period (Mansfield, 1986; Ziedonis, 2004). The exclusionary power of patent rights can bring market power (Bessen, 2009) and allow firms to pursue additional profit opportunities and competitive advantage (Gambardella, 2013; Somaya, 2012). While this logic generally applies to firms in every country, actual returns or benefits of patenting will significantly vary depending on institutional and market environments. Perhaps, there is no country that brings in such complexity and paradox for firms to deal with patenting activities as larger emerging economies like China and India. Markets are huge yet IPR protection remains weak. Albeit some of these governments have been making efforts in protecting patent rights, especially after joining the World Trade Organization (WTO), legal enforcement of IPR protection is impeded by a plentitude of perilous issues such as public empathy of copycatting (Luo, Sun, & Wang, 2011), weak judiciary and administrative systems in IPR (Bosworth & Yang, 2000; Wang, 2004), business and public sector corruption (Kshetri, 2009; Liu, 2006), and political and institutional instability (Lieberthal & Lieberthal, 2003). Such institutional voids or hardships relating to patenting activities are further exacerbated by lack of institutional transparency and limited and often selective enforcement of IPR law (Khanna & Palepu, 2013; Ostergard, 2000; Oxley, 1999). This makes it difficult to appropriate returns from innovation through patent protection (Al-Aali & Teece, 2013; Schankerman, 1998; Teece, 1986). However, We approach this paradox from the appropriability logic, complemented with the institutional logic. Thethe appropriability logic we develop originates from works that examine the crucial question of who canliterature in the framework of pProfit from iInnovation (Teece 1986, arrow 1962, levinLevin et al. 1987), as the involuntary leakage of knoweldge from the organization producing it could endanger the organizations incentives for innovationdemonstrates that . To protect the results of innovation, firms can not only invest in legal mechanisms such as patent and other forms of IPR, and but also use strategic mechanisms such as investments in complementary assets (e.g., marketing, sales, customer service) to appropriate returns from innovation. Our appropriability logic, developed in the context of emerging markets, comprises two key notions. First, large emerging economies such as china commonly encourage high-tech innovation through incentives and subsidies such as tax benefit (e.g., 15% tax rate versus the standard 25% tax rate), financial assitance, human resources support , R&D grants and favorable distribution channels (the us china business council, Jongwanich, motohashi). A key criterion for a company to qualify for the subsidies is its high-tech-enterprise status frequently determined by the companys ownership of local IPR such as patents (US CHINA BUSINESS COUNCIL). These subsidies either directly cut cost hence contribute to productivity gains of qualified companies, or constitute crucial comlementary resources for qualified companies to achievce productivity gain from their patented innovtion. Thus patenting, as a pre-requisite for the subsidies, can be highly valuable for companies, both foreign and domestic alike, in these large emerging markets. Second, aAlthough weak IPR protection in emerging markets may deteriorate the value of patents, we contend that the extent of deterioration is likely to be modest, for the following so can be compensated by the additional patent value due to government subsidies. Our rationale is two-fold reasons. OneFirst, a considerable amount of effort is necessary for imitators to develop ability to assimilate and exploit the codified knowledge exhibited in patent documents (Levin et al., 1987). More importantly, patent only represents a companyan innovators codified knowledge, whereas tacit knowleggknowledge in high-tech industries (e.g., technical details in manufacturing a complex engineering system or complex integration of patented and/or non-patented technologies to manufacture a product) in high-tech industries, which is much more difficult to acquire or imitate., can play important roles in linking patented innovation to actual productivity gainz (knowledge spillovers and local innovation systems). Thus, by solely understanding codified knowledge exhibited in patent documents, imitatorss may not produce high productivity gains for imitatorsbe able to imitate the patented technologies, as they do not possess the tacit knowledge which needs to be combined with codified knowledge to produce the innovative products. Seconda considratble amount of effort is necessary for imitators to develp ability to assimilate and exploit the external knwoldge exhibited in patenss (levin 1987). Two, new technology usually does not in its own right guarantee commercial success but should be balanced with resources in other areas. combined with Tthese complementary resources (e.g., specialized manufacturing capacity or unique routines) to achieve successful commercialization. are important for hHigh-tech companies to achieve productivity gain from their patented technologies. Thus simultaneous use of patents and complementary asset is likely to enhance appropriability, and generate productivity gain and patent premium. Indeed, the practice of combining legal appropriation mechanisms and strategic appropriatonappropriation mechanisms is common in high-tech industrisindustries as they are not mutually exclusive but rather imporatntimportant complements.Our appropriability logic, developed in the context of emerging markets, comprises two key notions. First, large emerging economies such as China commonly encourage high-tech innovation through incentives and subsidies such as tax benefit (e.g., 15% tax rate versus the standard 25% tax rate), financial assistance, human resources support, R&D grants and favorable distribution channels (the us china business council, Jongwanich, motohashi). A key criterion for a company to qualify for the subsidies is its high-tech-enterprise status frequently determined by the companys ownership of local IPR such as patents (US CHINA BUSINESS COUNCIL). These subsidies either directly cut cost hence contribute to productivity gains of qualified companies, or constitute crucial complementary resources for qualified companies to achieve productivity gain from their patented innovation. Thus patenting, as a pre-requisite for the subsidies, can be highly valuable for companies, both foreign and domestic alike, in these large emerging markets. The institutional logic we develop is based on works that integrate institutional theory (DiMaggio & Powell, 1983; Scott, 1987) and strategic choice that hinges in part on a firms dependence on external institutions that control critical resources (Oliver, 1991; Peng, 2003; Tolbert, 1985). This institution-based view of strategy, and Olivers strategic response logic to institutional processes in particular (Oliver, 1991; Oliver, 1997), holds that institutional forces enact a strong effect on organizations, (Peng, 2003) but this effect is not equal to every organization in the said institutional setting due to three idiosyncrasies - one in varying dependence on external institutions that maintain power stemming from resource control (Pfeffer & Salancik, 1978), second in varying strategic intent to exploit opportunities during institutional change (Hitt, Ahlstrom, Dacin, Levitas, & Svobodina, 2004), and third in varying policy treatments or capabilities in dealing with institutional dynamics (Hillman & Keim, 1995).Grounding on the appropriability logic and the institutional logic, we argue that foreign firms are likely to gain patent premium in large emerging markets with weak IPR protection because competitive opport