2.1. The Chinese IPR Model City Pilot Policy
Since its introduction in 1984, the Chinese Patent Law has undergone four amendments, such as extending the patent protection period for inventions to 20 years. With the subsequent enactment of more IPR protection policies, China has made major progress in IPR protection, and the number of patents has rapidly risen [
8]. However, the misuse of technological inventions, product piracy, and other IPR infringements often occur. These behaviors discourage companies from R&D and affect foreign direct investment [
9].
To further improve the IP protection system, China issued the “Outline of National Intellectual Property Strategy” in 2008, requiring “in-depth pilot work on various types of intellectual property”. The Chinese government conducted IPR pilot work at the city level in 2012, 2013, 2015, 2016, 2018, and 2019, and selected 77 national IPR model cities/districts in batches. The construction tasks of model cities mainly include four aspects:
- (a)
Increasing government investment. The pilot cities should incorporate IPR work into the local government’s annual assessment indicators. Furthermore, the government should increase funding, such as increasing the financial investment in IPR.
- (b)
Strengthen the construction of IPR laws and regulations. The pilot cities should formulate or revise local regulations on IPR.
- (c)
Promote the administrative enforcement of IPR. Pilot cities should actively perform administrative enforcement of patents, rights protection assistance, and infringement reporting complaints, among others.
- (d)
Optimize the innovation environment. The pilot cities shall publicize and report on the protection of IPR through mainstream media, portals, information platforms, and other channels to create an atmosphere for IP protection.
2.2. Literature Review and Hypothesis
In the literature, there is extensive research regarding the impact of IP protection on technological innovation. Most scholars believe that stronger IPR can promote technological innovation [
10]. The reason for this belief is that patent law reduces the firms’ spillovers of R&D by guaranteeing monopoly gains to inventors [
11], which further incentivizes firms to invest in R&D [
12]. Specifically, IPR protection promotes technological innovation in three ways. First, IPR protection can reduce R&D spillovers and ensure the benefits of innovation to companies. There is an externality problem for corporate R&D activities, where competitors can reap the economic benefits of innovation for free by imitating or illegally stealing patented technologies [
13]. Patent laws can confer exclusivity on innovations, and companies can continuously benefit through patent licensing or technology monopolies. IP protection will significantly reduce free-riding and, thus, stimulate corporate technology innovation. Second, IPR protection can ease information asymmetry and attract external investment. A company with stronger IP protection will be more willing to disclose innovation information to external shareholders and creditors, and it will be easier for the company to obtain external debt [
7]. Third, from the perspective of international technology transfer, developing regions with higher IP protection can attract foreign direct investment. When local IPR protection is weak, multinational enterprises’ R&D activities and technology applications are mainly conducted within the enterprise [
14]. With more vital local IPR protection, multinational enterprises can earn higher returns through patent technology monopoly, enhancing developing countries’ foreign direct investment and technology level [
9].
As part of the innovation output, green technologies are likely to be affected by IPR protection. Based on the above analyses, recent literature has similarly investigated the relationship between IP protection and green innovation from the perspectives of R&D activities, external investment, and technology transfer. For example, Schaefer [
15] argues that stronger IP protection will promote firms to actively develop green technologies if green technologies are more productive than other technologies. Cao et al. [
16] find that IP protection can promote green innovation by boosting firms’ investment in R&D and attracting foreign investment entry. Dussaux et al. [
17] find that strengthening IP protection can accelerate the international transfer of low-carbon technologies, such as solar photovoltaic and wind power. These results suggest that IP strength positively affects firms’ green patent production [
18]. In addition, a considerable body of literature on sustainable development emphasizes the critical role of IP protection. For instance, a study by Jiang et al. [
19] found that the Chinese IPR model city pilot policy reduced carbon emissions in cities by promoting green technological innovations. Liu and Zhong [
20] highlight the importance of IP protection in spurring technological innovations for environmentally friendly resource extraction. The Chinese IPR model cities pilot, as a representative policy initiative to enhance patent protection, will likely impact firms’ green innovation. From the literature, we propose a hypothesis as follows:
H1. The Chinese IPR model city pilot policy can accelerate enterprise green technology innovation.
How does the Chinese IPR model city pilot policy affect firms’ green technology innovation processes? The mechanism by which intellectual property protection affects firms’ green innovation may differ from non-green innovation. According to Barbieri et al. [
21], compared to non-green technologies, green technologies are more innovative, complex, and sustainable, requiring a higher level of skill, more diverse knowledge, and a unique combination of expertise in the technology development process. Hence, practitioners and scholarly literature advocate cross-industry collaborations to advance green technologies [
22,
23]. In this paper, we argue that the policy can promote firms’ green innovation by encouraging R&D cooperation and increasing human capital levels. When internal knowledge is insufficient to support a green technology innovation, companies will acquire critical knowledge, skills, and resources from other companies, external suppliers, and universities through collaborative R&D [
24]. Cooperative R&D is one of the determinants driving green technology innovation [
25].
However, there is a paradox in the relationship between patent protection and open innovation [
26]. Studies suggesting a positive correlation argue that firms tend to engage external partners when they can hinder technology spillovers through the patent system. For example, Cassiman and Veugelers [
27] argue that firms in external collaborations often use patents to limit the dispersal of crucial knowledge to external collaborators. Conversely, studies proposing a negative correlation underscore that the exclusivity of patent protection reduces the effectiveness of cooperative R&D and diminishes the attractiveness of external partnerships. Emphasizing the protection of a company’s proprietary information may complicate collaboration with external parties [
28]. While still a topic of debate within the literature, this paper posits that stronger protection of IPR has significantly increased companies’ willingness to engage in collaborative R&D with external industrial organizations. One reason for this phenomenon is that a robust IP legal system can reduce the R&D spillovers of a firm [
11]. Companies gain access to critical knowledge and technology when working with external organizations and avoid imitation or infringement of internal technology [
29]. According to Roh et al. [
30], with open innovation as the mediator, IPR can significantly affect a firm’s green process and product innovation. According to the above analyses, we propose the following hypothesis:
H2. The Chinese IPR model city pilot policy can promote green innovation by encouraging firms’ R&D cooperation.
With the emergence of many new technologies and product updates, companies must invest more in innovation, especially in future-oriented green technologies, to maintain the industry’s competitiveness and shorten product life cycles [
31]. Thus, companies will tend to rely on a highly skilled workforce in upgrading their production technology. The Chinese IPR model city pilot policy is critical in bolstering the market supply of human resources and stimulating the demand for high-level talent within firms. On the supply side, local governments have increased financial support for the training and recruiting of domestic and foreign technicians to promote the pilot policy. Consequently, the associated search and matching costs for firms to acquire human capital within the IPR pilot cities have been notably diminished. Additionally, established studies, such as Naghavi and Strozzi [
32], underscore the role of IPR protection in attracting the return of international migrants by fostering a supportive, protective environment and innovative climate, thus driving domestic technological advancement.
From the demand perspective, the IPR regime empowers firms to derive monopoly rents or excess profits when innovating, by granting temporary exclusionary rights to patent owners [
33]. Enhanced patent protection motivates firms to increase their investment in R&D, aiming to secure a larger market share and achieve competitive advantages [
34], thereby highlighting the critical importance of R&D personnel engaged in technology development. Consequently, firms take a more proactive approach in cultivating and attracting technological talent, as seen in examples such as Huawei, which employs scientists at competitive salaries globally. Research by Melero et al. also attests that patent protection effectively reduces the mobility of inventors within firms, with an additional patent granted decreasing the likelihood of changing employers by 23% on average [
35]. Therefore, we propose the following hypothesis.
H3. The Chinese IPR model city pilot policy can promote green innovation by increasing firms’ human capital levels.