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

ights enforcement on financing, R&D input, and R&D output. The evidence suggests that
facilitating financing and investing in R&D are the channels through which better IP rights
enforcement could affect, in the aggregate, the growth of the economy.
4.1 The effect of IP rights enforcement on financing
4.1.1 Access to new debt
We examine the relationship between provincial-level IP rights enforcement and the individual
firms’ ability to obtain external debt. We use a probit regression model for our 23,955 firm-year
observations. To control for other factors that may affect these firms’ ability to obtain external debt,
we include firm- and provincial-level characteristics. The model is specified as the following:
Y = α + β IP Rights Enforcement + β Firm Variables + β Provincial Variables
i,t 1 i,t-1 2 i,t-1 3 i,t-1
+ β Industry Dummies + ε
5 i i,t
(1)
The dependent variable,
Y
i , t
, is one if the net increase in debt is at least 5% of total assets in year t,
and zero otherwise. The set of firm-level variables include: patent dummy (which is coded as 1 if
the company has any patents before the current year and 0 otherwise), R&D intensity, sales growth
rate, intangible to total assets, return on assets (ROA), leverage, natural logarithm of total assets, and
natural logarithm of firm age. The definitions of these firm characteristics are listed in Appendix 3.
We also include provincial banking system development and corruption control, provincial GDP
growth, the number of universities in a province, as well as the metropolis dummy. All independent
variables in the regression model are lagged by one year. We also add 21 industrial dummy variables
according to Industry Classification Standard of CSRC. The standard errors are corrected for
heteroskedasticity and within-province correlations.
Insert Table 2
Table 2 (Columns 1 and 2) reports the probit estimates of the marginal effect of IPP1 (the
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