LAUSR

China's unrivalled growth in patent filings and grants, enhanced by government policy, reflects a strategic shift in transforming a labour-intensive economy to an innovation-driven incentives system. This study employs a patent dataset from SIPO to examine the productivity of Chinese patents in improving public firm financial performance. Evidence suggest an overall positive performance elasticity to patent production particularly among firms with efficiency-driven and customer-focused operating activities. Patents are found to have no impact or even negative impact on financial performance in other business areas. Patents generally exhibit a constant return to scale and appear as a complementary input to physical assets but a substitute to labour. Non-state owned public firms have performed consistently well throughout, regardless the policy changes. The productivity of granted patents of state owned firms has improved following the introduction of government reforms specifically aimed at promoting innovation.