Imported intermediate goods, intellectual property protection, and innovation in Chinese manufacturing firms

Jie Xie, Jiayu Tian, Yong Hu, Quan Wang and Zhaoqiong Dai

Economic Modelling, 2025, vol. 144, issue C

Abstract: As China continues to open up, its innovation output continues to grow. What role do imported inputs play in this circumstance? Based on an extended theoretical model and an empirical analysis using Chinese firm-level data, we found that firms using more imported inputs have higher innovation output. More imported inputs require government to improve the strength of intellectual property protection (IPP), which brings legal security for technology transfer and cooperation attached to imported inputs, accelerating innovation. However, we found that only when the strength of IPP is below a certain threshold, IPP enhances the positive impact of imported inputs on innovation output; when the strength of IPP exceeds this threshold, it hinders this positive impact. Kernel density analysis showed that China's average IPP strength remains below certain thresholds. Heterogeneity analysis was conducted based on innovation motivation, passthrough effects, and firm location. Finally, a multigroup multiperiod DID analysis confirmed our findings.

Keywords: Intellectual property protection; Imported intermediate goods; Manufacturing innovations; Multiple group difference-in-difference design with multiple periods (search for similar items in EconPapers)
JEL-codes: F10 O31 O34 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:144:y:2025:i:c:s0264999324003171

DOI: 10.1016/j.econmod.2024.106960

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