Does Enforcement of Intellectual Property Rights Matter in China ...

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circulated daily, with the main purpose of promoting provincial policies and affecting public opinions. All provincial government bodies at all levels must subscribe to this newspaper. Its readers include persons in all fields, in addition to government personnel. Being the only political Party in China, the attitude of the provincial Communist Party towards IP enforcement is critical in the protection of IP rights. A stronger advocacy of IP rights by the Party’s official newspaper in a province is expected to lead to better IP enforcement. We search for relevant articles in the newspaper using the following keywords: IP rights protection, patent right protection, trademark protection, copyright protection, fighting against IP infringement, fighting against trademark infringement, and fighting against copyright infringement. Then we read through the articles to make sure they indeed advocate IP rights protection. We use the full-text database of “China’s major newspapers” to search for the articles. A few Party newspapers are not included in the database in some of the years, which results in 90.9% coverage of all provincial Party newspapers. 8 Insert Table 1 Table 1 (Panel A) shows that the mean of IPP1 is 72.4%. What is most relevant for this study is its large variation across provinces, ranging from a low of 25% of IP cases won by the plaintiffs in the courts to a high of 87.5%. The map in Figure 2 demonstrates that this measure of IP rights enforcement varies greatly within China. Enforcement is best in the coastal region of China, weaker in Central China, and weakest in the Northeast and Southwest regions. However, even within each 8 One question about IPP2 is that: is it just cheap talk? We have observed that the “talk” does translate to action. A number of cases reported by the press, including Wall Street Journal, link the Chinese authorities’ promise to enforce IP rules with real actions to protect intellectual properties. One such example involves Zhejiang province. Zhejiang is one of the provinces with the highest IPP2 in our sample, i.e., it has the highest number of articles calling for IP protection. The capital of Zhejiang Province, Hangzhou, has “set targets for enforcement of intellectual-property rights”, and attracted a series of investment from Microsoft, including two new technology centers and other investments (Wall Street Journal, May, 16 th , 2009). 14
oad region, there are substantial variations across provinces. IPP2 has a mean of 8.535 with the standard deviation of 6.464. It ranges from 0 (not a single mention of IP protection by the official Party newspaper in Hainan in 2001) to 19 (19 times calling for IP protection by the official Party newspaper in Beijing in 2003). Insert Figure 2 3.2 Database of high tech firms The Ministry of Science and Technology (MOST) conducted an annual survey of unlisted high tech companies from 2001 to 2005. The surveyed companies are approved as high tech enterprises by the local Science and Technology Bureau, and are permitted to locate in the National Innovative and High Technology Industrial Development zones in designated cities throughout China. 9 The numbers of companies in the surveys are: 8,298 (for 2001), 9,743 (2002), 11,470 (2003), 13,261 (2004), and 15,459 (2005). Out of the 58,231 firm-year observations, we exclude firms that report no R&D expenditure or have no R&D personnel during the sample period, which leaves us with 40,845 firm-year observations. 10 Our regression models use one-year-lagged variables, thus firms that do not have data in at least two consecutive years are excluded. The final sample includes 23,995 firm-year observations. The surveyed samples are expected to cover all of China’s unlisted high tech companies in 9 In China, as in many countries, high tech firms in the special zones enjoy tax preferences and other policy support. 10 Although our companies are located in special zones for high tech firms where they could enjoy certain tax breaks and other subsidies, we do find some firms that do not seem to be actively engaged in R&D. It may be the case that these firms surreptitiously gain admission to the special high tech zones to enjoy the benefits, or they simply desire to be branded as high tech. For example, Shijiazhuang Zhenxing Clothing Production Co. Ltd., has not obtained the high-tech enterprise qualification but is located in Shijiazhuang High-tech Industrial Development Zone for preferential treatment. 15
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Page 31 and 32: References Allen, F., Qian, J., Qia
Page 33 and 34: Political Economy 106, 1113-1155. L
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