Empirical analysis of Research and Development expenses in light of Chinese IP violations

This study looks in to the way intellectual property rights are granted in China and the effect this have on R&D expenses for non-Chinese firms. In light of international agreements regarding intellectual property, China does not comply. This also follows from the dispute settlement the United States and others have applied for at the WTO. This study looks in to relationship between the presence of non-Chinese firms in China, given these violations, and the effect this has on the innovation expenses. The data of twelve non-Chinese firms was collected over the period 2000 – 2017. Panel data analysis shows relative R&D expenses can be explained by the relative share of turnover achieved in China, operational profit and the industry firms operate in. With and without these control variables, the presence of non-Chinese firms in China has a significant positive effect on the level of relative R&D expenses. This is surprising, as it is generally assumed that violation of intellectual property rights leads to a decrease of innovation expenses.