Skip to main content
SpringerLink
Log in

Adopting knowledge from reverse innovations? Transnational patents and signaling from an emerging economy

  • Published:
Journal of International Business Studies Aims and scope Submit manuscript

Abstract

Is there knowledge adoption of innovations from emerging economies? We theorize that, to help overcome information asymmetry across countries, granting patents to technology in the emerging economy of China can serve as a signal of technology potential and market opportunity to enhance technological knowledge adoption in a developed economy such as the United States. The effect may be greater in a complex technology sector with high information asymmetry than in a discrete technology sector, and in regions with less developed market intermediaries, where information asymmetry is high. Our difference-in-differences estimates using 4226 China–U.S. patent dyads and comparable U.S. patents support our hypotheses.

Résumé

Existe-t-il une utilisation des connaissances des innovations émanant des économies émergentes ? Nous pensons que, pour aider à surmonter l’asymétrie d’informations entre les pays, l’octroi de brevets technologiques dans l’économie émergente de la Chine peut servir d’indicateur du potentiel technologique et de l’opportunité de marché pour améliorer l’adoption des connaissances technologiques dans une économie développée telle que les États-Unis. L’effet peut être plus marqué dans un secteur technologique complexe avec une asymétrie d’informations élevée que dans un secteur technologique isolé, et dans les régions avec des intermédiaires de marché moins développés, où l’asymétrie d’informations est forte. Notre différence de différences d’estimations, fondée sur 4 226 dyades de brevets Chine–États-Unis et de brevets américains comparables, appuient nos hypothèses.

Resumen

¿Hay conocimiento de la adopción de innovaciones de economías emergentes? Teorizamos que para ayudar superar la asimetría de información entre países, otorgar patentes de tecnología en la economía emergente de China puede servir como una señal de potencial de tecnología y oportunidad de mercado para mejorar la adopción de conocimiento tecnológico en una economía desarrollada como los Estados Unidos. El efecto puede ser mayor en complejidad en el sector de tecnología con alta asimetría de información que en un sector de tecnología discreta, y en regiones con intermediarios de mercado menos desarrolladas, donde la asimetría de información es alta. Nuestras estimaciones de diferencias en diferencias usando 4226 diadas de patentes China-E.E.U.U. y comparable a patentes de E.E.U.U. apoya nuestras hipótesis.

Resumo

Existe adoção de conhecimento de inovações de economias emergentes? Teorizamos que, para ajudar a superar a assimetria de informações entre países, a concessão de patentes para tecnologia na economia emergente da China pode servir como um sinal do potencial tecnológico e da oportunidade de mercado para melhorar a adoção de conhecimento tecnológico em uma economia desenvolvida como a dos Estados Unidos. O efeito pode ser maior no setor de tecnologia complexa, com alta assimetria de informação do que no setor de tecnologia discreta e em regiões com intermediários de mercado menos desenvolvidos, onde a assimetria de informação é alta. Nossas estimativas de diferenças-em-diferenças usando 4.226 díades de patentes China-EUA e patentes comparáveis dos EUA apoiam nossas hipóteses.

摘要

发达经济体是否有采用来自新兴经济体的创新技术知识? 我们推论, 为了帮助克服各国之间的信息不对称,在新兴经济体中国授予技术专利可以作为技术潜力和市场机会的信号, 从而提高像美国这样的发达经济体的技术知识采用率。在高信息不对称性的复杂技术行业里的影响可能大于低信息不对称性离散技术行业, 以及在市场中介较不发达且信息不对称程度较高的区域里的影响可能大于市场中介较发达的区域。我们的使用4226个中国–美国专利对偶以及可比的美国专利的双重差分估算支持我们的假设。

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Figure 1
Figure 2
Figure 3

Similar content being viewed by others

References

  • Ai, C., & Norton, E. 2001. Interaction terms in nonlinear models. Working paper 2, Triangle Health Economics.

  • Alcacer, J., & Gittelman, M. 2006. Patent citations as a measure of knowledge flows: The influence of examiner citations. Review of Economics and Statistics, 88(4): 774–779.

    Article  Google Scholar 

  • Alcacer, J., Gittelman, M., & Sampat, B. 2009. Applicant and examiner citations in U.S. patents: An overview and analysis. Research Policy, 38(2): 415–427.

    Article  Google Scholar 

  • Allison, P. D., & Waterman, R. 2002. Fixed effects negative binomial regression models. In R. Stolzenberg (Ed.), Sociological methodology. Boston, MA: Blackwell.

    Google Scholar 

  • Almeida, P., Song, J., & Grant, R. M. 2002. Are firms superior to alliances and markets? An empirical test of cross-border knowledge building. Organization Science, 13(2): 147–161.

    Article  Google Scholar 

  • Arora, A., & Fosfuri, A. 2003. Licensing the market for technology. Journal of Economic Behavior and Organization, 52(2): 277–295.

    Article  Google Scholar 

  • Arora, A., Fosfuri, A., & Gambardella, A. 2001. Markets for technology: The economics of innovation and corporate strategy. Cambridge, MA: MIT Press.

    Book  Google Scholar 

  • Barney, J. B. 1986. Strategic factor markets: Expectations, luck, and business strategy. Management Science, 32(10): 1231–1241.

    Article  Google Scholar 

  • Barrett, C. W., van Biljon, P., & Musso, C. 2011. R&D strategies in emerging economies: Results from the McKinsey Global Survey. Research-Technology Management, 54(4): 17–22.

    Article  Google Scholar 

  • Bergh, D. D., Connelly, B. L., Ketchen, D. J., & Shannon, L. M. 2014. Signalling theory and equilibrium in strategic management research: An assessment and a research agenda. Journal of Management Studies, 51(8): 1334–1360.

    Article  Google Scholar 

  • Berry, H. 2017. Managing valuable knowledge in weak IP protection countries. Journal of International Business Studies, 48(7): 787–807.

    Article  Google Scholar 

  • Caldwell, M., & Troyer, M. 2017. The value of hidden citations in patent evaluation: Why the blind spot and how to uncover it. In IPWatchdog Paper. http://www.ipwatchdog.com/2017/01/02/value-hidden-citations-patent-evaluation/id=76138/. Accessed 4 March 2019.

  • Chan, C. M., Makino, S., & Isobe, T. 2010. Does sub-national region matter? Foreign affiliate performance in the U.S. and China. Strategic Management Journal, 31(11): 1226–1243.

    Article  Google Scholar 

  • Chan, K., Menkveld, A. J., & Yang, Z. 2008. Information asymmetry and asset prices: Evidence from the China foreign share discount. Journal of Finance, 63(1): 159–196.

    Article  Google Scholar 

  • China Patent Trademark Office. 2010. Schedule of fees for Chinese patent. http://www.chinatrademarkoffice.com. Accessed 4 March 2019.

  • Chua, R. Y. J., Huang, K. G., & Jin, M. 2019. Mapping cultural tightness and its links to innovation, urbanization, and happiness across 31 provinces in China. Proceedings of the National Academy of Sciences of the USA, 116(14): 6720–6725.

    Article  Google Scholar 

  • Cockburn, I. M., Kortum, S., & Stern, S. 2003. Are all patent examiners equal? The impact of examiner characteristics. In W. M. Cohen & S.A. Merrill (Eds), Patents in the knowledge-based economy. Washington, DC: National Academies Press. (Also 2002 NBER Working Paper No. 8980. http://www.nber.org/papers/w8980).

  • Cohen, W. M., Nelson, R. R., & Walsh, J. P. 2000. Protecting their intellectual assets: Appropriability conditions and why U.S. manufacturing firms patent (or not). NBER Working Paper 7552, National Bureau of Economic Research, Cambridge, MA. http://www.nber.org/papers/w7552. Accessed 4 March 2019.

  • Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. 2011. Signaling theory: A review and assessment. Journal of Management, 37(1): 39–67.

    Article  Google Scholar 

  • Du, J., Lu, Y., & Tao, Z. 2008. Economic institutions and FDI location choice: Evidence from U.S. manufacturing firms in China. Journal of Comparative Economics, 36(3): 412–429.

    Article  Google Scholar 

  • Duguet, E., & MacGarvie, M. 2005. How well do patent citations measure knowledge spillovers? Evidence from French innovation surveys. Economics of Innovation and New Technology, 14(5): 375–393.

    Article  Google Scholar 

  • Dushnitsky, G., & Shaver, J. M. 2009. Limitations to interorganizational knowledge acquisition: The paradox of corporate venture capital. Strategic Management Journal, 30(10): 1045–1067.

    Article  Google Scholar 

  • Fan, G., Wang, X., & Zhu, H. 2011. NERI index of marketization of China’s Provinces 2011 report. Beijing: Economics Science Press.

    Google Scholar 

  • Furman, J., & Stern, S. 2011. Climbing atop the shoulders of giants: The impact of institutions on cumulative research. American Economic Review, 101(5): 1933–1963.

    Article  Google Scholar 

  • Gans, J. S., Hsu, D. H., & Stern, S. 2002. When does start-up innovation spur the gale of creative destruction? RAND Journal of Economics, 33(4): 571–586.

    Article  Google Scholar 

  • Gans, J. S., Hsu, D. H., & Stern, S. 2008. The impact of uncertain intellectual property rights on the market for ideas: evidence from patent grant delays. Management Science, 54(5): 982–997.

    Article  Google Scholar 

  • Govindarajan, V., & Ramamurti, R. 2011. Reverse innovation, emerging markets, and global strategy. Global Strategy Journal, 1(3–4): 191–205.

    Article  Google Scholar 

  • Greene, W. 2004. Fixed effects and bias due to the incidental parameters problem in the Tobit Model. Econometric Review, 23(2): 125–147.

    Article  Google Scholar 

  • Haeussler, C., Harhoff, D., & Mueller, E. 2009. To be financed or not… The role of patents for venture capital financing. Discussion Papers in Business Administration 8970, University of Munich, Munich School of Management, Munich, Germany.

  • Hall, B. H., Jaffe, A. B., & Trajtenberg, M. 2002. The NBER patent citation data file: Lessons, insights and methodological tools. In A. Jaffe, M. Trajtenberg (Eds), Patents, citations and innovations. Cambridge, MA: The MIT Press. (Also available as 2001 NBER Working Paper No. 8498. https://www.nber.org/papers/w8498).

  • Hall, B. H., & Ziedonis, R. H. 2001. The patent paradox revisited: An empirical study of patenting in the U.S. semiconductor industry, 1979–95. RAND Journal of Economics, 32(1): 101–128.

    Article  Google Scholar 

  • Harhoff, D., & Reitzig, M. 2004. Determinants of opposition against EPO patent grants: The case of biotechnology and pharmaceuticals. International Journal of Industrial Organization, 22(4): 443–480.

    Article  Google Scholar 

  • Hausman, J. A., Hall, B. H., & Griliches, Z. 1984. Econometric models for count data with an application to the patents-R&D relationship. Econometrica, 52(4): 909–938.

    Article  Google Scholar 

  • Heeley, M. B., Matusik, S. F., & Jain, N. 2007. Innovation, appropriability and the underpricing of initial public offerings. Academy of Management Journal, 50(1): 209–225.

    Article  Google Scholar 

  • Henderson, R., Jaffe, A. B., & Trajtenberg, M. 1998. Universities as a source of commercial technology: A detailed analysis of university patenting, 1965–1988. Review of Economics and Statistics, 80(1): 119–127.

    Article  Google Scholar 

  • Hsu, D. H., & Ziedonis, R. H. 2013. Resources as dual sources of advantage: Implications for valuing entrepreneurial-firm patents. Strategic Management Journal, 34(7): 761–781.

    Article  Google Scholar 

  • Hu, A. G., & Jefferson, G. H. 2009. A great wall of patents: What is behind China’s recent patent explosion? Journal of Development Economics, 90(1): 57–68.

    Article  Google Scholar 

  • Hu, M.-C., & Mathews, J. A. 2008. China’s national innovative capacity. Research Policy, 37(9): 1465–1479.

    Article  Google Scholar 

  • Huang, K. G. 2010. China’s Innovation Landscape. Science, 329(5992): 632–633.

    Article  Google Scholar 

  • Huang, K. G. 2017. Uncertain intellectual property conditions and knowledge appropriation strategies: Evidence from the genomics industry. Industrial and Corporate Change, 26(1): 41–71.

    Article  Google Scholar 

  • Huang, K. G., Geng, X., & Wang, H. 2017. Institutional regime shift in intellectual property rights and innovation strategies of firms in China. Organization Science, 28(2): 355–377.

    Article  Google Scholar 

  • Huang, K. G., & Murray, F. E. 2009. Does patent strategy shape the long-run supply of public knowledge? Evidence from human genetics. Academy of Management Journal, 52(6): 1193–1221.

    Article  Google Scholar 

  • Huang, K. G., & Murray, F. E. 2010. Entrepreneurial experiments in science policy: Analyzing the Human Genome Project. Research Policy, 39(5): 567–582.

    Article  Google Scholar 

  • Immelt, J., Govindarajan, V., & Trimble, C. 2009. How GE is disrupting itself. Harvard Business Review, 87(10): 56–65.

    Google Scholar 

  • International Monetary Fund (IMF). 2010. World economic outlook database: Nominal GDP list of countries.

  • Jaffe, A. B., & Trajtenberg, M. 2002. Patents, citations and innovations: A window on the knowledge economy. Chapter 12. Cambridge, MA: MIT Press.

    Google Scholar 

  • Jaffe, A. B., Trajtenberg, M., & Henderson, R. 1993. Geographic localization of knowledge spillovers as evidenced by patent citations. Quarterly Journal of Economics, 108(3): 577–598.

    Article  Google Scholar 

  • Jia, N., Huang, K. G., & Zhang, C. M. 2019. Public governance, corporate governance and firm innovation: An examination of state-owned enterprises. Academy of Management Journal, 62(1): 220–247.

    Article  Google Scholar 

  • Keupp, M. M., Friesike, S., & von Zedtwitz, M. 2012. How do foreign firms patent in emerging economies with weak appropriability regimes? Archetypes and motives. Research Policy, 41(8): 1422–1439.

    Article  Google Scholar 

  • Kirmani, A., & Rao, A. R. 2000. No pain, no gain: A critical review of the literature on signaling unobservable product quality. Journal of Marketing, 64(2): 66–79.

    Article  Google Scholar 

  • Kogut, B., & Zander, U. 1992. Knowledge of the firm, combinative capabilities, and the replication of technology. Organization Science, 3(3): 383–397.

    Article  Google Scholar 

  • Lampe, R. 2012. Strategic citation. Review of Economics and Statistics, 94(1): 320–333.

    Article  Google Scholar 

  • Lanjouw, J. O., & Schankerman, M. A. 2001. Enforcing intellectual property rights. Discussion Paper 3093, Center for Economic and Policy Research, Washington, DC.

  • Lemley, M. A., & Shapiro, C. 2005. Probabilistic patents. Journal of Economic Perspectives, 19(2): 75–98.

    Article  Google Scholar 

  • Lerner, J. 1994. The importance of patent scope: An empirical analysis. RAND Journal of Economics, 25(2): 319–333.

    Article  Google Scholar 

  • Levin, R., Kievorick, A., Nelson, R. R., & Winter, S. G. 1987. Appropriating the returns from industrial research and development. Brookings Papers on Economic Activity, 1987(3): 783–831.

    Article  Google Scholar 

  • Li, J. T., & Qian, C. 2013. Principal-principal conflicts under weak institutions: A study of corporate takeovers in China. Strategic Management Journal, 34(4): 498–508.

    Article  Google Scholar 

  • Liegsalz, J., & Wagner, S. 2013. Patent examination at the state intellectual property office in China. Research Policy, 42(2): 552–563.

    Article  Google Scholar 

  • Lim, K. 2009. The many faces of absorptive capacity: Spillovers of copper interconnect technology for semiconductor chips. Industrial and Corporate Change, 18(6): 1249–1284.

    Article  Google Scholar 

  • Long, C. 2002. Patent signals. University of Chicago Law Review, 69(2): 625–679.

    Article  Google Scholar 

  • Mansfield, E. 1986. Patents and innovation: An empirical study. Management Science, 32(2): 173–181.

    Article  Google Scholar 

  • Mansfield, E., Schwartz, M., & Wagner, S. 1981. Imitation costs and patents: An empirical study. Economic Journal, 91(364): 907–918.

    Article  Google Scholar 

  • Mazzoleni, R., & Nelson, R. R. 1998. Economic theories about the benefits and costs of patents. Journal of Economic Issues, 32(4): 1031–1052.

    Article  Google Scholar 

  • Murray, F. E., & Stern, S. 2007. Do formal intellectual property rights hinder the free flow of scientific knowledge? An empirical test of the anti-commons hypothesis. Journal of Economic Behavior & Organization, 63(4): 648–687.

    Article  Google Scholar 

  • OECD. 2005. Patent database. http://www.oecd.org/document/41/0,3746,en_2649_34451_40813225_1_1_1_1,00.html. Accessed 4 March 2019.

  • Plummer, L. A., Allison, T. H., & Connelly, B. L. 2016. Better together? Signaling interactions in new venture pursuit of initial external capital. Academy of Management Journal, 59(5): 1585–1604.

    Article  Google Scholar 

  • Ramamurti, R. 2009. What have we learned about emerging-market MNEs? In R. Ramamurti & J. V. Singh (Eds.), Emerging multinationals in emerging markets: 399–426. Cambridge: Cambridge University Press.

    Chapter  Google Scholar 

  • Reuer, J. J., Tong, T. W., & Wu, C.-W. 2012. A signaling theory of acquisition premiums: Evidence from IPO targets. Academy of Management Journal, 55(3): 667–683.

    Article  Google Scholar 

  • Rysman, M., & Simcoe, T. S. 2008. Patents and the performance of voluntary standard setting organizations. Management Science, 54(11): 1920–1934.

    Article  Google Scholar 

  • Scotchmer, S. 1991. Standing on the shoulders of giants: Cumulative research and the patent law. Journal of Economic Perspectives, 5(1): 29–41.

    Article  Google Scholar 

  • Singh, J. 2007. Asymmetry of knowledge spillovers between MNCs and host country firms. Journal of International Business Studies, 38(5): 764–786.

    Article  Google Scholar 

  • Singh, J., & Agrawal, A. 2011. Recruiting for ideas: How firms exploit the prior inventions of new hires. Management Science, 57(1): 129–150.

    Article  Google Scholar 

  • Spence, M. 1973. Job market signaling. Quarterly Journal of Economics, 87(3): 355–374.

    Article  Google Scholar 

  • State Intellectual Property Office of China (SIPO). 2008. Intellectual property rights statistical annual reports. http://english.sipo.gov.cn/lawpolicy/annualreports/index.htm. Accessed 4 March 2019.

  • Thompson, P. 2006. Patent citations and the geography of knowledge spillovers: Evidence from inventor- and examiner-added citations. The Review of Economics and Statistics, 88(2): 383–388.

    Article  Google Scholar 

  • Tsai, B.-H. 2010. Does litigation over the infringement of intellectual property rights hinder enterprise innovation? An empirical analysis of the Taiwan IC industry. Issues and Studies, 46(2): 173–203.

    Google Scholar 

  • Von Graevenitz, G., Wagner, S., & Harhoff, D. 2011. How to measure patent thickets: A novel approach. Economics Letters, 111(1): 6–9.

    Article  Google Scholar 

  • Wang, X., Fan, G., & Zhu, H. 2007. Marketisation in China: Progress and contribution to growth. In R. Garnaut L. & Song (Eds.), China: Linking Markets for Growth: 30–44. Canberra, Australia: Asia Pacific Press.

  • Wang, H., & Qian, C. 2011. Corporate philanthropy and corporate financial performance: The roles of stakeholder response and political access. Academy of Management Journal, 54(6): 1159–1181.

    Google Scholar 

  • Wild, J. 2008. Patent quality and the plummeting USPTO approval rate. Intellectual asset management magazine.

  • Wooldridge, J. M. 1999. Distribution-free estimation of some nonlinear panel data models. Journal of Econometrics, 90(1): 77–97.

    Article  Google Scholar 

  • World Bank. 2008. Doing business in China 2008. Beijing: Social Science Academic Press.

    Google Scholar 

  • Xie, Z., & Li, J. 2018. Exporting and innovating among emerging market firms: The moderating role of institutional development. Journal of International Business Studies, 49(2): 222–245.

    Article  Google Scholar 

  • Yao, D. 1988. Beyond the reach of the invisible hand: Impediments to economic activity, market failures, and profitability. Strategic Management Journal, 9(S1): 59–70.

    Article  Google Scholar 

  • Zhao, M. 2006. Conducting R&D in countries with weak intellectual property rights protection. Management Science, 52(8): 1185–1199.

    Article  Google Scholar 

  • Zott, C., & Huy, Q. N. 2007. How entrepreneurs use symbolic management to acquire resources. Administrative Science Quarterly, 52(1): 70–105.

    Article  Google Scholar 

Download references

Acknowledgements

We are grateful to Editor Gabriel Benito and anonymous reviewers for their insightful feedback during the review process. Earlier versions of this paper benefited from the helpful comments of Xuesong Geng, Ivan Png, Jasjit Singh, Heli Wang and the participants at the Academy of Management annual meeting, Academy of International Business annual meeting, CEIBS strategy and entrepreneurship academic symposium, DRUID conference, INSEAD entrepreneurship research workshop, NUS RISE seminar, SHUFE research forum, SMU research seminar, U.C. Berkeley-Peking university patent conference, and research seminars at Fordham University, Nankai University, Peking University, Renmin University, Shandong University, Tsinghua University, University of Sydney, University of Western Australia, and Xiamen University. We thank Wenxin Guo for her excellent research assistance. We gratefully acknowledge funding support from the Ministry of Education AcRF Tier 1 Grant R-266-000-118-133, and from the Research Grants Council of Hong Kong (HKUST #16505817). The usual disclaimers apply.

Author information

Authors and Affiliations

  1. Department of Industrial Systems Engineering and Management, and Department of Strategy and Policy, National University of Singapore, Singapore, 117576, Singapore

    Kenneth G Huang

  2. Department of Management, School of Business and Management, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong

    Jiatao Li

Authors
  1. Kenneth G Huang
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Jiatao Li
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Kenneth G Huang.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Accepted by Gabriel Benito, Consulting Editor, 2 April 2019. This article has been with the authors for three revisions.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Huang, K.G., Li, J. Adopting knowledge from reverse innovations? Transnational patents and signaling from an emerging economy. J Int Bus Stud 50, 1078–1102 (2019). https://doi.org/10.1057/s41267-019-00241-9

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s41267-019-00241-9

Keywords

Search

Navigation