Innovation and Appropriation: Insights from the Chinese Patent Survey
34 Pages Posted: 2 Feb 2023
Date Written: February 1, 2023
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: Suggested Citation