*2.2. Definition of the Variable*

(1) Quantity and quality of technological innovations

Patents are generally considered good indicators of technological innovation. Compared to utility model and design patents, invention patents have higher requirements and are more innovative and breakthrough. Utility model patents represent the improvement in existing technology by enterprises to a certain extent, but the improvement is relatively small. The patent does not contain any technological innovations. Therefore, this study selected the number of invention patent applications and utility model patent applications to measure the quantity of technological innovation.

This study used patent knowledge width to measure the quality of technological innovation. The patent knowledge width can measure the quality of patents based on the complexity and universality of the knowledge contained in patents. Therefore, this study used the practices of Zhang and Zheng [29] and Aghion et al. [30] to measure the quality of each patent using the knowledge width method, which can measure the complexity of knowledge contained in a patent. In this study, the formula for calculating the width of patent knowledge is *width* = <sup>1</sup> − <sup>∑</sup> *<sup>x</sup>*2; *<sup>x</sup>* is the proportion of each group of patent IPC classification numbers. We then added the patent knowledge width to the enterprise level according to the average value. The greater the knowledge width value of a patent, the wider the knowledge involved in the patent, and therefore the higher the quality of innovation.

(2) Government subsidies

In this study, the data of government subsidy were processed logarithmically.

(3) Control variables

In order to exclude the influence of other factors on the regression model and estimation results, referring to the research of Chen et al. [31], this study selected some variables related to the nature and capabilities of the enterprise for control including: capital structure (*lev*), profitability (*roa*), enterprise size (*size*), proportion of fixed assets (*ppe*), proportion of independent directors (*dir*), enterprise age (*age*), enterprise growth ability (*gov*), and enterprise human capital (*hc*) (see Table 1 for the definition of variables).


**Table 1.** Definition of the variables.
