Intellectual Property Rights and Firm Performance in China from the Perspective of Firm Heterogeneity

Different firms could benefit differently from intellectual property (IP) rights owing to differences in their complementary capabilities or assets. Based on Teece's Profiting From Innovation theory, this study comprehensively investigates the heterogeneous impacts of IP rights on firm performance by considering three firm factors (firm size, trade type, and industry grouping) and three forms of IP rights (patents, utility models, and designs). To this end, a novel and large dataset spanning 16 years is constructed by matching firm-level information with data on IP filings. The results show that IP rights have a significant positive relationship with firm performance, but there is obvious heterogeneity across different groups of firms. Such relationships are stronger for large firms than for small- and medium-sized enterprises, stronger for exporting firms than for non-exporting ones, and stronger for firms in the high-tech industry than for those in the low-tech industry. It broadens the focus to three forms of IP rights rather than just patents, making an even stronger case for the heterogeneous performance impacts of IP rights based on the type of IP ownership. This study facilitates a wider understanding of the relationship between IP rights and firm performance from the perspective of firm heterogeneity and suggests that firms should attach importance to the establishment of IP-related competences and assets in addition to the creation and application of IP rights.