A spatial econometric panel data examination of endogenous versus exogenous interaction in Chinese province-level patenting

We examine the provincial-level relationship between domestic Chinese intellectual property (IP) and knowledge stocks using a space-time panel model and data set covering monthly patent activity over the period 2002-2010. The goal of the modeling exercise is to explore the elasticity response of IP to knowledge stocks classified by type of creator (universities and research institutes, enterprises, and individuals). A focus is on spatial and time dependence in the relationship between knowledge stocks and IP, which implies spatial spillovers and diffusion over time. Many past studies of regional knowledge production have focused on patent applications as a proxy for regional output from the knowledge production process. However, this ignores the distinction between patent applications and patents granted, with the latter reflecting a decision and ability to convert knowledge produced into IP. This study differs in its focus on the regional relation between IP and knowledge stocks and the space-time dynamics of these. Using patents granted as a proxy for IP, and past patent applications as a proxy for regional knowledge stocks, allows us to explore the implied quality of knowledge production by various types of creators. Because Chinese patent applications have grown by 22 %, questions have been raised about the quantity versus quality of these applications. Our findings shed light on this issue.