Patent Premium in Countries with Weak Intellectual Property Rights Protection

Given the high opportunity cost of patenting in countries with weak intellectual property right (IPR) protection, it is paradoxical to observe an increase of patenting activities by multinational corporations and indigenous companies in some of those countries in the past decade. We undertake a large-scale firm-level study in the context of China (an emerging economy with weak IPR protection) to investigate the cost and benefit associated with patenting activities there. We employ the method of propensity score matching to investigate whether the total factor productivity of multinational corporations and indigenous companies grew faster after they applied for patents in China than had they not done so, and also compare the increase of total factor productivity at various levels of market competition.