Innovation and Appropriation: Insights from the Chinese Patent Survey

34 Pages Posted: 2 Feb 2023

See all articles by Dong Cheng

Dong Cheng

Union College

Michael A. Klein

Rensselaer Polytechnic Institute

M. Fuat Sener

Union College - Department of Economics

Date Written: February 1, 2023

Abstract

Using comprehensive microdata based on the Chinese Patent Survey, we examine the appropriation strategies that firms use to capture value from their innovations. Our data allow us to analyze firm preferences over five distinct appropriation strategies, as well as the motivations underpinning these strategies. We find a robust overall preference for the use of patents among Chinese firms in all industries and across multiple characteristics. However, our results indicate that firms pursuing the most expensive R&D projects exhibit a relative preference for secrecy over patents, consistent with theories that predict the use of secrecy to protect a firm’s most valuable intellectual assets. Furthermore, we find that firms routinely indicate a preference for multiple, complementary strategies to protect innovations. In particular, our findings suggest that firms utilize patents to secure initial financing and negotiate third party production contracts, while relying on secrecy and/or first mover advantage to protect against competitor imitation.

Keywords: Appropriation Strategies; Innovation; Patents; Secrecy; First Mover Advantage; China

JEL Classification: O31, O32, O34

Suggested Citation

Cheng, Dong and Klein, Michael A. and Sener, M. Fuat, Innovation and Appropriation: Insights from the Chinese Patent Survey (February 1, 2023). Available at SSRN: https://ssrn.com/abstract=4345122 or http://dx.doi.org/10.2139/ssrn.4345122

Dong Cheng (Contact Author)

Union College ( email )

807 Union Street
Schenectady, NY 12308
United States

HOME PAGE: http://www.dongcarlcheng.com

Michael A. Klein

Rensselaer Polytechnic Institute ( email )

United States

M. Fuat Sener

Union College - Department of Economics ( email )

Schenectady, NY 12308-3107
United States
(518) 388-7093 (Phone)
(518) 388-6988 (Fax)

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