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The Impact of City-level Intellectual Property Protection on Foreign Capital Entry into Chinese Enterprises

【Authors】
SHEN Guobing & HUANG Shuojun
【WorkUnit】
Fudan University, 200433.
【Abstract】

Multinational companies are deeply concerned with intellectual property protection (IPP). Base on the theoretical model, and Tobit and Probit regressions, we construct the city-level IPP index by using the number of intellectual property trial cases and patent grants respectively, and explore the impact of city-level IPP on foreign capital entry into Chinese enterprises. We find that firstly, the strengthening of city-level IPP can increase foreign capital share in paid-in capital of Chinse enterprises; secondly, the promotion effect of city-level IPP on foreign capital entry is stronger in small-medium cities and middle-income cities, and in the industries with high technology, thus IPP exerts “regional catch-up effect” and “industrial adjustment effect” via attracting foreign investment; thirdly, the promotion effect of strengthening city-level IPP on foreign capital share is stronger in firms with stronger local market orientation and with higher-tech transfer. The results show that the strengthening of city-level IPP raises foreign capital share via reducing market costs and increasing revenue of technology transfer. Accordingly, in the context of industrial upgrading and a new round of opening up, the local governments should implement differentiated IPP measures to stabilize the scale of and improve the quality of foreign investment while considering the differences in sensitivity of local economic development and industrial technology level to the IPP.


JEL:F21, F43, O34

【KeyWords】
City-level Intellectual Property Protection, Foreign Direct Investment, Foreign Capital Entry into Enterprises