نوآوری یا تقلید؟ نقش محافظت از حقوق مالکیت معنوی

We study how uncompensated research and development (R&D) spillovers – the leakage of proprietary information through imitation or theft – affect firms’ investment decisions. Using variation in property rights protections across different regions within China we find that (1) uncompensated spillovers are greater in regions with weaker property rights, (2) such spillovers are associated with lower R&D expenditures, and (3) the latter is exacerbated in low property rights regimes. In addition to identifying a specific channel through which legal protections affect incentives for innovation and R&D, our results support arguments in the literature that the enforcement of property rights affects firm investment and growth.

R&D investment is an intangible asset whose value is highly sensitive to the threat of expropriation. That is, absent strong property rights protections, firms will be unable to capitalize on their investment. Furthermore, as noted by Ayyagari et al. (2008a), many predictions stemming from the (Jensen and Meckling, 1976) nexus-of-contracts view of the firm rely on the extent to which the property rights assigned in contracts are protected in practice. As such, a natural research question is the association between law, finance, and firm-level investment. There is, however, limited evidence of this at the micro-level (Claessens and Laeven 2003; Desai et al., 2003). We contribute to the literature by providing evidence of a specific channel through which legal protections affect incentives for innovation and R&D investment—the leakage of proprietary information through imitation or theft. We find evidence that R&D investments have positive spillover effects in that one firm's R&D benefits neighboring firms. However, when intellectual property rights protections are weak, a firm's ability to capture the gains from investment (by collecting fees from the neighboring firms) is limited, and this reduces the incentive to invest in innovation. Using a sample of more than 300,000 Chinese industrial firms, and relying on the fact that local property rights protections vary across different regions within China, we find that R&D spillovers are larger in regions with weaker property rights protections and smaller in regions with stronger property rights protections. Such spillovers, in turn, are negatively associated with firms’ research and development expenditures. The evidence also suggests that strong intellectual property rights protections discourage expropriation, thus mitigating the negative effects of spillovers on R&D investment, and encouraging innovation. These findings persist after controlling for other institutional factors including firms’ access to external finance, local economic conditions, after considering the endogeneity of R&D spillovers using an instrumental variables approach, and after controlling for firm location selection effects using a two-stage Heckman regression. We contribute to the literature examining aspects of legal protections, financial market development, and economic growth (for example, La Porta et al., 1997, La Porta et al., 1998 and La Porta et al., 2000, and Carlin and Mayer, 2003). Research and development (R&D) is an important activity which, as noted by Brown et al. (2009), is a critical input to innovation and growth. At the same time, as highlighted by Lerner and Schoar (2005), little attention has focused on understanding the exact avenues through which legal systems affect financial development.3 Our results also complement those of recent and contemporaneous papers. For example, Ayyagari et al. (2008b) report cross-country evidence that firms’ innovative activities are closely related to institutional factors including competition and access to finance. In the context of China, Cull and Xu (2005) find that firms reinvest more of their profits when property rights protection and contract enforcement is stronger. Similarly, Long (2010) looks at business dispute resolutions in courts across China and reports that active court systems are associated with more: investment, adoption of technology, innovation, and complex transactions. Of importance, our findings suggest that strong property rights protections in certain regions of China are important in inducing investment in R&D, and spurring the entrepreneurial activity that is critical to China's long-term economic growth. The remainder of this study is organized as follows. Section 2 provides further background and develops the hypotheses. Data and summary statistics are presented in Section 3. Section 4 shows methodology and empirical results. Section 5 concludes.

In viewing the firm as a nexus of contracts, the property rights of contracting parties and the security of those property rights clearly influence decision making, and thus firm-level outcomes. As such, ongoing work continues to examine interactions between legal protections, financial markets, and the incentives for innovation and investment. More recently, there has been increased emphasis on connections between law, finance and property rights at the firm-level. We contribute to the literature by studying the association between R&D investment and property rights protections across different regions within China. We identify a specific channel through which property rights affect R&D investment, the leakage of proprietary information or R&D spillovers. Our results suggest that R&D spillovers are larger in regions with weak intellectual property rights relative to regions with strong intellectual property rights. Moreover, the negative association between R&D expenditures and spillovers is larger in regions with weak intellectual property rights protections, suggesting that weak property rights protections undermine incentives to invest in R&D activities. Conversely, our results indicate that strong intellectual property rights restrain R&D spillovers and provide incentives for firms to invest in R&D. Our analyses control for access to external finance, the state of the local economy, and persist after considering the endogeneity of R&D spillovers using an instrumental variables approach. Further, in the IV analyses we find that strength of the negative association between R&D expenditures and the level of spillovers is larger. Our findings also contribute to the literature examining links between law, finance, and economic growth. Of note, the growth of the Chinese economy appears as a counter-example to the conventional wisdom that a country's economic development depends critically on its financial markets and legal structures. In addition to the potential for transactions to be safeguarded by informal mechanisms, such as reputation, custom, and social norm (Allen et al., 2005 and Allen and Qian, 2009), it appears that local property rights protections also play an important role in China's development. From a public policy perspective, moves that provinces can take to enhance such protections will likely further enhance the country's economic development.