Intellectual property, institutional dynamics, and firm innovation

The relationship between intellectual property (IP) and innovation has been discussed extensively in extant literature. However, the dynamic essence of IP as an institutional context, particularly its setback and reversal, has received little attention. Through the lens of institutional dynamics theory, this study identifies four asymmetric categories of IP institutional dynamics: accelerating reforms, decaying reforms, decaying reversals, and accelerating reversals in a typical emerging market, China. Favorable institutional dynamics (i.e. accelerating reforms and decaying reversals) improve firms' R&D efficiency, whereas unfavorable institutional dynamics (i.e. decaying reforms and accelerating reversals) reduce R&D efficiency. Moreover, R&D input decreases in an unfavorable institutional context.