Working Paper: CEPR ID: DP18637
Authors: Robin Kaiji Gong; Yao Amber Li; Kalina Manova; Stephen Teng Sun
Abstract: We investigate how international patent activity enables firms from emerging economies to thrive in the global marketplace. We match Chinese customs data to US patent records, and leverage the quasi-random assignment of USPTO patent examiners to identify the causal effect of a US patent grant on the subsequent export performance of Chinese firms. Successful first-time patent applicants achieve significantly higher export growth, compared to otherwise similar first-time applicants that failed. This effect operates only in small part through market protection for technologically patent-related products in the US, and is largely driven by expansion in other markets. The response across destinations and products reveals that a US patent award signals the Chinese firm's capacity to produce high-quality products and credibility to honor contracts, mitigating information frictions in international trade. There is little evidence for the relaxation of financial constraints or the promotion of follow-on innovation.
Keywords: patent rights; innovation; export performance; trade; market protection; asymmetric information; signaling
JEL Codes: F10; F14; O30; O31; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| patent approval (O38) | firm's capacity to produce high-quality products (L15) |
| patent approval (O38) | credibility in honoring contracts (D86) |
| patent approval (O38) | mitigation of information frictions in international trade (F12) |
| successful first US patent application (N82) | enhanced survival in existing destination-product markets (Z33) |
| successful first US patent application (N82) | expansion in existing destination-product markets (Z33) |
| patent approval (O38) | export growth of unrelated products to the rest of the world (F69) |
| patent approval (O38) | export growth of patent-related products to the US (O39) |
| successful first US patent application (N82) | export growth of Chinese firms (F23) |