State Ownership and Corporate Innovation Efficiency
53 Pages Posted: 12 Nov 2016 Last revised: 28 Nov 2018
Date Written: November 20, 2018
The conventional wisdom is that state ownership may hinder patenting through reduced incentives and pronounced agency problems associated with state-owned enterprises (SOEs). Empirical evidence from a variety of contexts, including the U.S., Europe, and China, is consistent with this view, that reductions in state ownership are associated with an increase in patent counts. In this paper, we investigate the innovative efficiency of Chinese SOEs. Innovative efficiency refers to output of patents per dollar spending of R&D expenditure. The data indicate that SOEs, especially SOEs that serve minority shareholders, are substantially more innovatively efficient than non-SOEs. The relative innovative efficiency of SOEs is more pronounced amongst firms with high financial constraints and those away from financial centers. The data are consistent with the view that, in the Chinese context, there are favorable benefits to state ownership through access to talent, connections, and technological resources that enables efficient patent outcomes from R&D expenditure.
Keywords: State ownership, Innovative efficiency, Financial constraints
JEL Classification: G32, G38, O31, O38
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