Investigating the real effect of China’s patent surge: New evidence from firm-level patent quality data

• We examine whether there was a real improvement in patent quality or productivity with the patent surge in China. • We focus on large and medium-size enterprises (LMEs) and construct a unique data set that links firm-level production data (from the ASIEC database) with data on patent quality. The matched firm-level data spans from 1998 to 2013. • Using fixed effects regressions, we find that the initiation and intensity of patenting activities (quality-adjusted or not) are positively associated with an LME's productivity. These results are robust to productivity measured in either output productivity, sales productivity, or TFP. • We find that firms’ conscious R&D efforts had positive influences on the overall quality of patents in China. However, we also discover that China’s utilization of R&D investments was not that efficient, the association between R&D and patent quality had become weaker in more recent years, and the growth of patenting was still relatively unbalanced. This paper examines whether there was a real improvement in patent quality or productivity with the patent surge in China. Based on the novel database we compiled, we demonstrate that accumulated patent stock measured using quality metrics was positively associated with the productivity of large and medium-size enterprises (LMEs). We also find that R&D investments by LMEs led to increases in patent quality. However, the estimated R&D-patenting elasticities in China are found to be lower than those estimated in developed countries. We offer some explanations and discuss their implications for policy considerations.