Dong Cheng

Using data from the Chinese Patent Survey, we document that the perceived importance of lead time advantages over competitors varies substantially across firms and is negatively associated with firms' preferences for patents relative to trade secrecy. We study this relationship formally in an endogenous growth model in which innovation-specific lead time influences firms' decision to patent their innovation or to keep it secret. We find that innovators with sufficiently strong lead time choose secrecy to avoid information disclosure, while those with weaker lead time patent to facilitate licensing revenue. Intellectual property policy affects growth through the expected value of innovation and firms' endogenous patent propensity, which determines the extent of patent thickets that impose a licensing burden on future innovators. We show that when firms have access to effective informal protection, strengthening patent protection may encourage patenting without fostering innovation, consistent with the empirical pattern known as the patent puzzle.

Aggregate real U.S. GDP fell by roughly 26 percent between 1929 and 1932, yet the severity of the Great Depression varied dramatically across states: CPI-deflated income per capita declined by 15 percent in Maryland but by 48 percent in South Dakota. To analyze this heterogeneity, we digitize Slaughter’s (1937) panel of state-by-sector production income for all 48 U.S. states and construct a novel set of sector- and state-specific deflators, allowing us to separate movements in physical quantities produced from the large relative price changes that occurred during the Great Depression. We then discipline a three-sector, 48-region dynamic spatial stochastic general equilibrium model and recover sequences of sector-state productivity shocks that exactly reproduce the observed sector-state quantity paths. The choice of deflators proves central, as correct deflation shifts the aggregate contraction away from agriculture and toward manufacturing while preserving idiosyncratic income variation across agricultural-dependent states. We further show that narratives based on common or even sector-specific shocks are inconsistent with the observed evolutions of state-level quantities and relative prices. Explaining the geography of the Great Depression therefore requires a high-dimensional sector-state shock structure.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Using comprehensive microdata from the Chinese Patent Survey, we examine the appropriation strategies that firms use to capture value from their innovations and assess the motivations underpinning these strategies. Although Chinese firms exhibit a robust overall preference for patents, we find that firms often use patents for reasons other than directly protecting intellectual assets from competitors. In particular, our results suggest that firms utilize patents to secure external financing and negotiate third‐party production contracts, while relying on secrecy and/or first mover advantage to protect against competitor imitation. Furthermore, we find that firms pursuing the most expensive R&D projects exhibit a relative preference for secrecy over patents, consistent with theories that predict the use of secrecy to protect a firm's most valuable intellectual assets. Our results provide novel insights into China's recent patenting surge and help inform policy efforts to encourage domestic innovation in developing economies.

Using comprehensive microdata based on the Chinese Patent Survey, we examine the appropriation strategies that firms use to capture value from their innovations. Our data allow us to analyze firm preferences over five distinct appropriation strategies, as well as the motivations underpinning these strategies. We find a robust overall preference for the use of patents among Chinese firms in all industries and across multiple characteristics. However, our results indicate that firms pursuing the most expensive R&D projects exhibit a relative preference for secrecy over patents, consistent with theories that predict the use of secrecy to protect a firm’s most valuable intellectual assets. Furthermore, we find that firms routinely indicate a preference for multiple, complementary strategies to protect innovations. In particular, our findings suggest that firms utilize patents to secure initial financing and negotiate third party production contracts, while relying on secrecy and/or first mover advantage to protect against competitor imitation.

This paper investigates the heterogeneous effects of finance on firm exports through the lens of differential exporting modes. China's WTO accession leads to an export deregulation, which empowers private domestic firms with low registered capital to export directly. This quasinatural experiment encourages firms switching from indirect to direct exporting, and thus provides an ideal setting to explore the heterogeneous effects of finance on exports among switchers and non‐switchers. Applying the difference‐in‐differences (DID) approach to a comprehensive survey data on Chinese manufacturing firms, we find that finance improves exports more for firms switching from indirect to direct exporting, relative to continuous indirect exporters. Our mechanism analysis shows that finance manifests a more pronounced encouraging effect on firm‐level operation efficiency and productivity among switchers. Moreover, we show that the heterogeneous effects of finance on exports among switchers and non‐switchers are more pronounced in the post‐WTO accession period. The time‐varying heterogeneous impacts suggest an economic loss caused by the export distortion before China's WTO accession because it prevents productive yet financially constrained private domestic firms from direct exporting.

We investigate the relationship between firm exporting and energy consumption using newly matched manufacturing data from China. We reconfirm that exporting is negatively correlated with electricity consumption. Moreover, we document novel evidence that foreign exporters consume more electricity than domestic exporters, which supports the pollution haven hypothesis.