Sharing technology, sharing rights: Patent law reform and R&D collaboration in China, 1985-2006

This paper investigates the impact of patent law reform on R&D collaboration among domestic firms in China from 1985 through 2006. During this period, China's patent law underwent two major amendments, the first in 1992, and the second in 2000. In my empirical analysis, I test well-established arguments from transaction cost economics, which hold that reducing the risk of unfair appropriation by strengthening IP protection should boost the frequency of short-term R&D collaborations. Using a novel, panel dataset of firm-years constructed from patenting histories, I find that the amendments—which aimed to strengthen IP rights enforcement—increased rates of joint patenting, even when controlling for the boom in patenting activity throughout this period. However, I find that the amendments' positive effect on joint patenting varied by industry;firms in knowledge-intensive industries engaged in more joint patenting in the periods following the amendments than firms in non-knowledge-intensive fields. I also show that while the second amendment in 2000 increased joint patenting between firms more than it increased science-industry joint patenting, most of the increase in between-firm joint patenting came from incremental patents. I conclude with a discussion of the results' implications for R&D collaboration in China and other emerging economies.