The use of intellectual property right bundles and firm performance in China

The study investigates whether and how the joint use (bundling) of different intellectual property rights—patents, utility models (UMs), and designs—is associated with superior firm performance in a developing-country context (China). It addresses gaps in prior literature that focused largely on single IPRs (especially patents) and on developed economies. Key research questions are: (1) How does the joint use of IPRs vary with firm characteristics such as industry and size? (2) Is the joint use of IPRs associated with a performance premium relative to single-type IPR use? (3) Which specific IPR bundle combinations (e.g., patent–UM, patent–design, UM–design, or patent–UM–design) are most strongly associated with performance? The context is China’s manufacturing sector post-2008 patent law amendment, where UMs and designs are widely used and offer faster, cheaper protection. The purpose is to provide firm-level evidence from China on IPR bundling patterns and their performance correlates, thereby informing strategy and policy on using multiple IPR mechanisms to appropriate value from innovation.

The theoretical background distinguishes three formal IPRs in China (patents, UMs, designs) protected under patent law, with differing subject matter, examination procedures, inventive step thresholds, and terms. UMs protect incremental or minor technical innovations with lower inventive requirements and faster, cheaper procedures than patents, making them attractive to small or latecomer firms and as complements for large firms’ portfolios. Designs protect aesthetic, non-functional product features, supporting marketing, differentiation, and consumer appeal, and have been linked to higher growth and productivity. Prior literature indicates interdependence and complementarity among different IPRs (e.g., patents with trademarks or copyrights), and that bundling is more prevalent in larger firms and high-tech sectors in developed economies, with positive associations to performance and growth. However, empirical evidence on bundles beyond the patent–trademark pair, and in developing countries, is limited. The study builds on these insights to evaluate patent–UM–design combinations in China and their relationship to firm outcomes.

Data: The study merges two sources for 2009–2013: (1) China’s Annual Survey of Industrial Enterprises (ASIE) with firm-level demographics and financials; (2) China National Intellectual Property Administration (CNIPA) records of IPR applications (patents, UMs, designs). IPR applications are used (not grants) to better reflect contemporaneous innovative activity. Matching: Following He et al. (2018), records were harmonized and matched by standardized firm/applicant names in three steps (extraction, preprocessing, matching). Exclusions: IPRs assigned to natural persons or firms outside mainland China; ASIE firms with missing data, zero age/employment, or non-positive revenues/profits. The final panel covers 577,117 unique firms, of which 100,613 are IPR-active (filed at least one patent/UM/design). IPR categories: Seven mutually exclusive categories—PAT only, UM only, DES only (Single use); PAT & UM, PAT & DES, UM & DES, and PAT & UM & DES (Joint use). Definitions follow EUIPO conventions, with “IPR-active” firms owning ≥1 IPR. Econometric models: Two OLS model sets with log performance outcomes—(a) General comparison of Single use vs Joint use; (b) Specific categories (all seven). Base category: firms with no IPRs (omitted). Outcomes: revenue per employee (log), profit per employee (log). Controls: firm size (employment, log), firm age, industry fixed effects, and year fixed effects to capture business cycle effects. Standard errors are reported; significance at p<0.01. Robustness checks: (i) Split periods 2009–2010 vs 2011–2013; (ii) Industry splits by above/below-average bundling prevalence; (iii) Using IPR stock owner status (active before 2013). Results are consistent across checks.

Descriptive patterns: • Only 17.43% of all firms are IPR-active (filed at least one patent/UM/design). • Among IPR-active firms, Single use accounts for 51.54% (PAT only 10.52%; UM only 27.31%; DES only 13.71%); Joint use accounts for 48.45%. • Most common bundles: PAT & UM 26.40%; PAT & UM & DES 13.03%; UM & DES 6.86%; PAT & DES 2.16%. • Economic weight: Multi-IPR (Joint use) firms are 48.45% of IPR-active firms but account for 65.56% of employment, 73.13% of revenue, and 74.03% of profit. Triple owners (PAT & UM & DES, 13.03% of firms) account for 25.78% of employment, 29.72% of revenue, and 35.66% of profit. • By industry: Bundling is highest in high-tech sectors—computer/communication/electronics (62.41% of firms bundle; 94.70% of IPRs held by bundlers), electrical equipment (58.47%; 91.83%), machinery/equipment (56.11%; 89.49%), motor vehicles/transport equipment (54.28%; 91.59%). Traditional sectors like wearing apparel show low bundling (20.53%) and greater reliance on designs or UMs. • By firm size: Bundling increases with size—micro/small 18.25%; medium 44.27%; large 60.57%. Share of concurrent IPRs among each size’s IPRs: 55.59% (micro/small), 76.00% (medium), 91.23% (large). UM-only use remains sizable even for large firms (20.95%). Econometric results (relative to non-IPR owners; all p<0.01): General models (Table 5): • Single use coefficient: +0.241 (revenue/employee), +0.274 (profit/employee). • Joint use coefficient: +0.697 (revenue/employee), +0.855 (profit/employee). Specific models (Table 6): • PAT only: +0.436 (rev), +0.570 (profit). • UM only: +0.240 (rev), +0.272 (profit). • DES only: +0.096 (rev), +0.056 (profit). • PAT & UM: +0.692 (rev), +0.884 (profit). • PAT & DES: +0.572 (rev), +0.664 (profit). • UM & DES: +0.331 (rev), +0.248 (profit). • PAT & UM & DES: +0.928 (rev), +1.146 (profit) — the largest association. Exact percentage premiums (vs. non-owners): • General: Single use +27.25% revenue and +31.52% profit; Joint use +100.77% revenue and +135.14% profit. • Specific (revenue): PAT only +54.65%; UM only +27.12%; DES only +10.08%; PAT & UM +99.77%; PAT & DES +77.18%; UM & DES +39.24%; PAT & UM & DES +152.94%. • Specific (profit): PAT only +76.83%; UM only +31.26%; DES only +5.76%; PAT & UM +142.06%; PAT & DES +94.25%; UM & DES +28.15%; PAT & UM & DES +214.56%. Overall: All IPR categories are positively associated with performance; bundles outperform single IPRs; bundles including patents exhibit the strongest associations; the triple bundle shows the largest premium.

The findings directly address the research questions. First, IPR bundling strongly varies with firm characteristics: it is more prevalent in high-tech, machinery, electronics, and transport-related sectors and increases monotonically with firm size, reflecting higher innovation complexity, resource availability, and the need to protect multiple facets of products. Second, the joint use of IPRs is associated with a sizable performance premium over single-type use, consistent with complementarity across protection mechanisms. Bundles allow firms to simultaneously appropriate technological (patents and UMs) and aesthetic/market (designs) value, improving revenue generation and profitability. Third, among specific bundles, combinations that include patents yield the strongest associations, with the triple bundle (patent–UM–design) showing the largest performance gains, suggesting that covering significant inventions (patents), incremental improvements (UMs), and aesthetic differentiation (designs) provides the broadest appropriation scope. The results align with prior evidence from developed economies, extending it to a large developing-country setting and to bundles beyond patent–trademark pairs. The study highlights the strategic value of integrated IPR management for Chinese manufacturers and underscores the complementary nature of different IPR types in complex innovation and commercialization environments.

This paper provides the first large-scale evidence from China on the use of IPR bundles (patents, UMs, designs) and their association with firm performance. Contributions include: (1) documenting the prevalence and economic weight of IPR bundling and its strong dependence on industry and firm size; (2) establishing that both single and, more strongly, joint IPR use are positively associated with revenue and profit per employee; and (3) showing that bundles that include patents—and especially the patent–UM–design combination—are linked to the largest performance premiums, supporting the view that different IPRs are complementary. The results encourage firms to adopt holistic IPR strategies that jointly protect technological and aesthetic aspects of innovation. Future research should incorporate additional IPR forms (notably trademarks), consider IPR quality and bundle composition, examine group-level ownership structures, and investigate the causal mechanisms and determinants of bundling across industries, regions, and stages of technological development.

• The analysis is correlational and does not establish causality between IPR bundling and firm performance. • Trademarks are excluded due to data constraints, limiting coverage of branding-related protection. • The data cannot identify firm group affiliations; matching is at the immediate owner level, potentially biasing performance attribution within groups. • IPR quality/intensity (e.g., citation impact, scope, claim breadth) is not measured; firms with identical IPR status may differ in bundle quality and composition. • Additional determinants of bundling (e.g., regional policy, competitive intensity, product life cycles) are not modeled explicitly and warrant future study.