Innovation under debtor-friendly institutional policy: Strategic patenting perspective of Chinese listed firms

Jinho Park, Byungchul Choi, Wei Huang

Research output: Journal PublicationArticlepeer-review

3 Citations (Scopus)

Abstract

Drawing on insights from the strategic patenting perspective, we examine the impact of debtor-friendly institutional policy on the innovation behavior of firms. We argue that while conventional wisdom indicates the negative impact of debt on patent counts, debt financing based on a set of weak creditor rights may lead firms to apply for more patents at the expense of the innovativeness of those patents. By analyzing financial data and patenting information of the Chinese listed firms, we show that debt financing motivates firms to apply for more patents while both R&D intensity and the portion of innovative patent applications diminish. These effects are more pronounced among firms more adversely exposed to China's debtor-friendly institutional policy. Our paper extends the scope of innovation financing studies by demonstrating that firms behave strategically in the context of state policies, in this case by privileging patent quantity over quality.

Original languageEnglish
Article number102719
JournalInternational Review of Financial Analysis
Volume89
DOIs
Publication statusPublished - Oct 2023

Keywords

  • China
  • Debtor-friendly
  • Innovation
  • Institutional policy
  • Strategic patenting perspective

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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