Intangible Capital and Firm Productivity: the Case of China

This study examines the role of intangible assets in enhancing firm productivity in China and explores how the relationship varies by state ownership, sector and technology. I use the Levinsohn-Petrin method to estimate an extended production function with intangibles alongside the traditional factors. The estimated elasticity for intangibles falls within the upper bounds estimated in the existing literature. Elasticity rises with state ownership but is lower for old traditional firms. The type of intellectual property also matters. Invention patents contribute to productivity in medium- and high-technology sectors. Design also contributes when considering goods producing sectors. Utility models (short-term patents) exhibit no benefits. A temporal analysis highlights a transition period during which reliance on non-patent intangibles within medium- and high-technology sectors in China grows. It also highlights low technology sectors increasing their reliance on patented rights, especially designs. These trends reach an equilibrium in 2016 but fall for manufacturing during and after the COVID-19 pandemic.