Research On The Impact Of Institutions On Innovation

The world had witnessed the miracle of Chinese economy in the past decades.However,the development strategy that relied on resources can't no longer support the high growth rate in China,therefore Chinese economy is facing the challenge of lacking sustainable force for economic development.To encourage innovation,the government needs to figure out the effective and efficient ways to support innovation,either by implementing policies or by improving the institutional environment for innovation.This research topic provides an insightful view of the role that government plays in stimulating innovation and it helps accumulate more reasonable evidence for policy suggestions.Innovation policies have been implemented in the past decades.Back to the planning economy,the technology projects were planned,invested by government officials.To improve science and technology,the Chinese government had been built a lot of high-tech zones to integrate the resources and advantages of research institutions and universities.Later,the research institutions were transformed to firms or research institutions that belong to firms.Chinese government has been providing various supports for innovation,such as R&D subsidy,preferential tax and so on.Many countries in the world has been adopting innovation policies to develop technology and science,including China.However,the innovation policies have not been approved as the sustainable way to achieve higher level of innovation.Based on many empirical evidences,innovation policies,such as R&D subsidy and preferential tax maybe effective in the short run,but they could also induce some potential problems such as low-quality innovation and "squeeze-out" of private innovative investment.Besides,the uncertainties coming from those policies may change the expectation of private individuals which may have impact on the policy effects.Instead of innovation policies,improving institutions is more likely to help private individuals forming steady expectations of the economic environment,thus increasing long-run investment.These institutions include property protection,business environment and so on.Due to the high risk and large uncertainty of innovation activities,innovation often evolves long-run investment for guaranting the return.Therefore,the institutional environment can play more critical role in innovation.This paper first elaborates the innovation policies and institution arrangements and compares their advantages and disadvantages.By focusing on the role of intellectual property right protection and relaxing governmental regulation in improving institutional environment for innovation,this paper utilizes three government experiments to study the impact of institutions on innovation,mainly focusing on intellectual property protection and relaxing governmental regulation.These government experiments include piloting patent insurance,improving the patent administrative enforcement and cutting administrative approvals.Based on these three quasi-experiments,this paper finds that:(1)Patent enforcement insurance helps enhancing intellectual property protection,attributing to higher level of innovation.Regions with patent enforcement insurance market increase the number of patent case significantly,especially for patent litigation.Meanwhile,the patent value increases significantly for listed companies that are in the pilot cities.In terms of patent type,invention value increases while the value of utility model and appearance design does not change.To be more specific,the numbers of invention application and approval both increase for firms in the pilot cities,implying that firms have enhanced the level of innovation in response,especially high-quality innovation.Besides,the impact of patent enforcement insurance on firm innovation differs in firm's ownership and industry characteristics.In terms of ownership,State-owned Enterprises apply more inventions than private firms.Based on industry characteristics,firms in industries with more easy reverse-engineering technology have more invention applications than firms in other industries.In addition,firms in more concentrated industries increase utility model applications and gain more invention approval significantly.(2)Improving patent administrative enforcement helps enhancing intellectual property,encouraging innovation.In regions that establish patent administrative enforcement standards,the case of patent administrative enforcement and patent counterfeiting both increase significantly.By specifying the requirements of law and shortening the time limits,patent administrative enforcement improves patent protection and encourages innovation.Specifically,firms in regions with established patent administrative enforcement standards increase their patent application,especially for invention applications and approvals.In regions with more requirements of claiming illegal actions and shorter time limits for closing cases,firms will apply more inventions rather than utility models or designs.(3)Reducing the administrative approvals lowers the innovation cost for firms by developing innovation intermediaries and technology market,leading to more innovations.For regions that reduce the administrative approvals in science and technology sector,the number of patent agencies and patent deputies increases and technology market expands.In regions with reduced administrative approvals,firms apply more patents and get more approved patents.Among the three types of patents,firms apply more inventions that considered as high-quality innovation.By enjoying the benefits of the expansion of patent service market and technology transfer market,firms have more incentive to innovate since their innovation costs have been reduced.Based on the results in the empirical analysis,we found that patent insurance pilot,implementing patent administrative enforcement and relaxing governmental regulation of innovation market have significant positive impact on innovation.The implications is that when governments restrict their power in areas where markets have more information,the reduced innovation cost will encourage firms to invest.Instead of setting restrictions and barriers,governments may focus on governance ex-post,such as implementing the patent administrative enforcement to set rules and expectations for economic activites.