Government R&D subsidies, intellectual property rights protection and innovation

Abstract

Purpose This paper aims to investigate whether a complementary effect exists between government R&D subsidies (GRSs) and intellectual property rights (IPR) protection on innovation performance in the pharmaceutical manufacturing industry in China. This paper also attempts to understand whether this complementary effect is significantly different across China’s eastern, central and western regions. Design/methodology/approach The study sample comprised 28 provinces involved in the pharmaceutical manufacturing industry in China from 2003 to 2014. Ordinary least squares was used to test the complementary effects of GRSs and IPR protection on innovation performance. The seemingly unrelated estimation test was also applied to ascertain whether differences existed between the eastern and western regions. Findings A complementary effect between GRSs and IPR protection in terms of improving the innovation of pharmaceutical manufacturers was found to exist only in eastern and western regions. There was no significant difference in the complementary effect between GRSs and IPR protection in terms of improving innovation among the three regions. Without considering the interaction effect of GRSs and IPR protection, the GRSs were negatively associated with innovation in the eastern region, but positively related to the innovation in central region. Originality/value This study contributes to the literature on government policies and innovation by incorporating the interaction effect of GRSs and IPR protection on innovation in the context of a high-tech industry (pharmaceutical manufacturing) in an emerging economy (China). It also explores the internal differences in the influence of this complementary effect on innovation in an emerging economy, enriching the institution-based view.

Transnational knowledge transfer or indigenous knowledge transfer: which channel has more benefits for China's high-tech enterprises?

“…We use the number of patent applications as an indicator of innovation performance (Park and Bae, 2018; Williams and Vrabie, 2018). In previous studies, innovation was mostly measured by new product sales or the number of patents (Acs et al , 2002; Deng et al , 2019). This study uses the number of patent applications to measure the high-tech industries innovation has the following reasons: firstly, the number of patent applications is a non-economic indicator, which avoids “rent-seeking” behaviour of high-tech enterprises.…”

“…This research considers two sector level control variables because of the object of the analysis is the high-tech sector. Actually, this study also considers the size and competition of the high-tech industry as the control variable (Deng et al , 2019; Guo et al , 2016), but the empirical results found that these two variables are too highly correlated with the R&D stock capital, so these two factors are not adopted in this research. R&D intensity . This study uses the ratio of R&D expenditure to the total sale of industry i in year t to measure the R&D intensity.…”

Does (un)-related variety promote regional innovation in China? Industry versus services sector

“…Because R&D investment gradually depreciates, we use the perpetual inventory approach to calculate R&D capital stock and take the value of 15 per cent as a depreciation rate, which is consistent with previous studies (Hong et al, 2016;Deng et al, 2019). Second, we use regional population density to control for urbanization economies (URB), and it is measured as the number of inhabitants per square kilometer (Ning et al, 2016).…”

Government Innovation in Social Sciences: A Literature Review

“…The government innovation early in development for more advanced regions, while developed countries have exploited the power of the Internet to enable public services successfully, developing countries are relatively slow in developing egovernment that succeeded (Wei & Liu, 2015). In addition, the scholars explained the role of government innovation in competition among companies gradually depending on the capacity of companies to continue to be innovative in a cost-efficient manner against the background of economic globalization, rapid technological development, and industrial convergence (Deng, Lu, Hong, Chen, & Yang, 2019).…”