Intellectual property rights protection and export product quality: Evidence from China

Intellectual property rights protection (IPP) at destination countries is an important determinant of exports, a result shown by the existing literature. This paper empirically examines the effect of the degree of IPP on export product quality at the origins, using firm-product level data from Chinese exporters and city-level statistics of IPP. To establish the causal relationship, we employ an instrumental variable (IV) approach. Our panel regression results from 2008 to 2013 show that the de facto IPP contributes to the export product quality upgrading and the result is robust against variations of IPP measures, IVs, and different combinations of control variables such as the firm and industry level subsidies. Our heterogeneity results indicate that the betterment of IPP favors less capital-intensive firms; foreign-owned firms relative to domestic-owned firms; and firms in innovation-intensive industries. The effect of IPP on export product quality is statistically insignificant in certain geographic regions (i.e., central and western regions) and trade mode (i.e., processing trade). In addition, we show that the channels through which IPP takes effect on product quality include strengthened R&D input, new product development, and mitigated financial constraints.

Automated summary

The protection of intellectual property rights at destination countries significantly affects export product quality, contributing to the improvement of product quality for Chinese exporters. Better intellectual property rights protection benefits less capital-intensive firms, foreign-owned firms, and firms in innovation-intensive industries.