Intellectual property management and patent propensity in Chinese small firms

Xibao Li
Research Center for Technological Innovation; Key Research Base in Humanities and Social Sciences, Ministry of Education; School of Economics and Management, Tsinghua University, Beijing, China

Hao Ni
Beijing Intellectual Property Protection Association, Beijing, China

PP: 43 - 58

Abstract

Based on a survey of local firms in Zhongguancun Science Park in Beijing, China, this paper examines the impact of intellectual property management practices on the patent propensity of small firms. With a particular focus on two aspects of intellectual property management, we find that R&D personnel-related management practices, such as training and rewarding mechanism, are more effective in enhancing a firm's willingness to patent and encouraging the patenting behavior within the firm. Monitoring the R&D process in IPR management, such as proposal and outcome evaluation, is less influential in fostering manufacturing firms to patent. One implication emerged from the analysis is that a firm can speed up or intensify its generation of intellectual property right assets by introducing well-developed management practices, even without reorienting its intellectual property strategies.

Keywords

patents, patenting propensity, innovation surveys, management practices, science parks

Article Text

Despite the popular use of patents as indicators of innovation in the empirical literature, pitfalls associated with measuring innovation outcomes with patent data have long been acknowledged (see, e.g., Griliches 1990). One widely accepted caveat is that patents only capture a part of the innovation output. Moreover, there exist remarkable differences in what Scherer (1965; 1983) called the propensity to patent across sectors or firms. As the research by Levin et al. (1987) and Cohen et al. (2000) shows, patenting is only one mechanism that innovating firms employ to appropriate benefits from innovations, and its effectiveness and importance in protecting innovations from imitation by potential competitors varies across industries. In an attempt to systematically investigate the propensity to patent at the firm level, recent empirical studies on US and European firms have supplied ample evidence suggesting that the difference in the patent propensity rate is also related to firms' size, R&D collaboration or alliance, intellectual property right (IPR) strategies, and innovation types (see e.g. Arundel & Kabla 1998; Brouwer & Kleinknecht 1999; Cohen et al. 2000; Duguet & Kabla 1998; Lichet & Zoz 1998; Mansfield 1986).

Due to the difference in the patent systems across different countries, it remains unclear whether the results or findings obtained from developed economies also hold true in other contexts such as transitional or emerging economies where the protection of IPR is quite weak or even not existent. Even among Western countries where the protection of IPR is in good shape, available evidence suggests that the findings obtained from different countries are not always consistent and comparable. For instance, the research by Cohen et al. (2000) and Arundel & Kabla (1998) found that the patent propensity in the early 1990s in the US was higher than that observed in the European Union. Granstrand (1999) noticed a similar difference between Europe and Japan. In the context of emerging economies, however, the same issue is almost left unexplored, and empirical evidence available so far is quite rare.

Given the difficulty in generalizing the previous results, in this study we extend this line of research into one of the largest emerging economies in the world - the People's Republic of China. The weakness of Chinese IRP regime has been documented both in the academic literature and in public press release. According to multiple indicators measuring the strength of IPR compiled in Zhao (2006), China consistently ranks among the weakest IPR protected countries. In terms of patent rights index reported by Park (2008), China is ranking far behind most western countries. In such a weak IRP country, it would be interesting to see what factors influence firms' decision to patent their innovations.

More importantly, not simply exploring the old issue in a new context, we extend the literature in an innovative approach and examine the impact of a firm's IPR management practices on its patent propensity rate. Few, if any, of existent studies has clearly taken this into consideration before, despite the fact that the relevance or importance of management practices has been evidenced for some time in the literature. For instance, in an effort to explore the underlying reason that spur the surge of patenting in the US since the middle of 1980s, Kortum & Lerner (1999) conclude after a process of elimination that the increase in patenting is very much likely to be spurred by changes in the management of research. This argument was further strengthened in a later work by Hall & Ziedonis (2001). These authors noticed a dramatic increase of patents among semiconductors firms since the middle of 1980s, in spite of the relatively ineffectiveness of patenting as an appropriation mechanism in semiconductor industry. To explore this paradox, they conducted intensive interviews with industry representatives, analyzed the patenting behavior of 95 semiconductor firms, and finally reached a conclusion (Hall & Ziedonis 2001: 122):

The shift in patenting relative to R&D spending since the mid-1980s may indeed reflect important managerial changes, but primarily in how firms manage the R&D output, not necessarily the R&D input side of the innovation process. For example, several firms had overhauled their internal patent procedures during the past 5-10 years by hiring more in-house patent attorneys, rewarding engineers with bonuses for patented inventions, expanding the involvement of patent attorneys in corporate wide activities (such as strategic alliances, licensing, and litigation decisions), and creating in-house "patent committees" to oversee and simplify the otherwise time consuming process of writing, filing, and revising patent applications.

From this quotation, it is quite clear that the improvement of IPR management practices (such as hiring patent attorneys, rewarding engineers and so on.) can be a reason that contributes to an increase of patents. Unfortunately, none of previous studies has incorporated this issue into consideration, although the impact of IPR and/or R&D strategy was appropriately acknowledged.

The purpose of this study is to fill this gap in the literature and explore the effect of firm-specific IPR management practices that influence the patent propensity rate in Chinese context. Our analysis is based on a new dataset collected from a survey of small firms in Zhongguancun (ZGC) area of Beijing, the capital of China. The survey instrument was designed with a particular emphasis on two aspects of IPR management practices. That is, how a firm incorporates IPR strategy into the management of R&D personnel and R&D process. The results show that these management practices do play a role in influencing firms' patenting decision.

View references

Navigate: Archives | Contents | Top of page

Search

Translate

Related Publications from eContent Management