Patent Intensity and Firm Performance: Evidence from Chinese Listed Firms
DOI:
https://doi.org/10.62051/ijgem.v6n2.11Keywords:
Innovation output, Patent intensity, ROAAbstract
Using a large sample of approximately 2,500 listed firms in China over the past thirty years, I examine the relationship between innovation output and firm performance, as measured by return on assets (ROA). I document a significant increase in the number of patents granted to Chinese listed firms domestically. My findings indicate that patent intensity—measured as the number of patents scaled by total assets—is positively associated with future ROA, even after controlling for various patent-related covariates, as well as year and industry fixed effects. These results contribute to the existing literature on the positive impact of innovation on firm performance, which has been well-documented in Western economies such as the United States and European countries. Furthermore, I identify heterogeneities in this relationship across industries, patent types, and firm sizes. Specifically, the effect of patent intensity on subsequent ROA is more pronounced among firms in the manufacturing sector, those with a higher intensity of invention patents, and those with greater market equity. This study provides new evidence on the real effects of innovation output on firm performance in the context of China’s listed firms.
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