Industry-University Collaboration and Commercializing Chinese Corporate Innovation

David Hsu, Management, The Wharton School; Po-Hsuan Hsu, National Tsing Hua University

Abstract: We examine how industry-university collaboration (IUC) enhances Chinese firms’ commercialization of their technologies using a comprehensive dataset of medium- sized and large industrial firms and research universities in China. Measuring IUC with the occurrence and frequency of patents co-assigned to both firms and universities, we first document that firms with more IUC activities report more new product sales. Both dynamic difference-in-differences analysis and instrumental variable regressions support a causal interpretation of the positive relation. In addition, firms with more IUC activities produce more patents and patents that are of higher quality, are closer to basic science, and are more exploratory – all confirming an innovation-enhancing mechanism. Further evidence suggests that our results can be attributed to two channels through which firms benefit from IUC: knowledge acquisition and talent recruiting.