Patent statistics: A good indicator for innovation in China? Patent subsidy program impacts on patent quality

This study investigates whether patent subsidy programs to promote regional innovations have generated a large volume of low-quality applications in China, resulting in biased patent statistics as an indicator for innovations. We find that subsidies on patent filing fees encouraged the filing of low-quality patents, resulting in a decreased grant rate. Although grant-contingent rewards increased the patent grant rate, they also encouraged patents with narrow claim breadth. Our empirical results confirm a general concern that patent subsidies have side effects of encouraging patent applications of low quality or value. However, patent subsidy programs do not affect granted patent trends, particularly for those requested by businesses. Therefore, while the surge of patent applications exhibits upward biases as an innovation indicator, increases in granted patents can be explained by the increase of technological capability in China’s business sector.