title: The Firm Outcomes of Patent Signals, Collateralization and Examiner Efficiency: Evidence from Chinese SMEs
Creators: name: Zhang, Xuan
Publisher: name: University of Liverpool Repository
Year: 2025

description: Over the past two decades, the Chinese economy has experienced a fast pace, coupled with significant growth in Small and Medium-sized Enterprises (SMEs) and corporate (particularly SMEs) patenting activities (e.g., patent filings and grants). As a pivotal player in the Chinese economy, the Chinese government has stipulated a series of innovation-oriented policies to facilitate SMEs’ external financing and growth and promote the patent application and the quality of granted patents. This thesis examines the impact of patents as a quality signal, government intervention in patent-pledged financing policies, the busyness of patent examiners on Chinese SMEs’ external financing and performance outcomes.
 
The first empirical chapter demonstrates that a synergistic utilisation of legal and technological signals, embodied through patents, positively influences access to long-term bank financing for SMEs. The study finds that legal signals alone are insufficient to increase bank financing notably, but when paired with strong technological signals, they have a significant and positive effect. Transparent governance, higher R&amp;D intensity, and lower marketisation levels amplify the positive impact of patent signals on bank financing. The robustness checks and endogeneity tests support the baseline results. Further, the enhanced patent examination policy in China not only improves SMEs’ access to bank financing but also positively impacts their financial performance by stimulating R&amp;D investment, encouraging follow-on innovation, and enhancing sales growth, underscoring the broader economic benefits of effective patent policies and the significance of supporting innovation-driven activities among SMEs.
 
Findings from the second empirical chapter indicate that government intervention significantly enhances the likelihood of Chinese SMEs employing patents as collateral for obtaining external finance. The analysis confirms a positive association between government intervention and the probability of SMEs using patents as collateral for loans. The effectiveness of government intervention is contingent on the quality of public governance, with stronger governance capabilities enhancing the likelihood of patent collateral finance. Sector-specific effects highlight the need for targeted policies. While government intervention positively influences the number of patent collateral contracts, the impact on the quality of pledged patents is relatively weaker, emphasising the importance of improving government screening abilities.
 
The third empirical chapter reveals that a reduced examiner workload resulting from the 2016 patent examination enhancement policy positively correlates with issuing higher-quality patents in China. Patents granted by examiners managing reduced workloads exhibit characteristics such as larger patent family sizes, increased backward citations, and a higher quantity of other references, suggesting that such a policy initiates a more robust examination process. Moreover, enhanced patent quality positively influences firm performance, as measured by Return on Assets (ROA). Firms that experience patent quality improvements after the policy change demonstrate increased ROA in ensuing periods. Nevertheless, the positive relationship between patent quality and firm performance may weaken in the subsequent periods.