Abstract: Can China catch-up with the United States technologically by mobilizing its bureaucracy and assigning ambitious targets to local governments? We analyzed an original dataset of 4.6 million patents filed in China from 1990 through 2014 and paired this with a new, rigorous measure of patent novelty that approximates the quality of innovation. In 2006, China’s central government launched a national campaign to promote indigenous innovation and introduced bureaucratic targets for patents. Our analysis finds evidence that these targets, combined with political competition, pushed local governments to “game the numbers” by channeling relatively more effort toward boosting non-novel—possibly junk—patents over novel patents. Nationally, this is reflected in a surge of aggregate patents paired with a falling ratio of novel patents. China’s innovation drive is susceptible to manipulation and waste—it is enormous in scale but low in productivity.

Abstract: This study documents an unexplored corporate rent-seeking phenomenon in non-representative regimes—relocating headquarters (HQ) to the political center. Focusing on China, we find that firms that relocate their HQs to Beijing (the political center) enjoy increased political favors, but those that move to Shanghai or Shenzhen (the country's two main economic centers) do not. Although both groups of movers experience improved profitability, their sustainable growth paths diverge after relocating. Firm productivity and innovation worsen after relocating to Beijing, but improve after moving to Shanghai or Shenzhen. Overall, these findings support the argument that political favoritism benefits firms' profitability but impairs their productivity and innovation.



(2nd round Revise and Resubmit at Strategic Management Journal)

(1st round Revise and Resubmit at Strategic Management Journal)

(1st round Revise and Resubmit at Organization Science)

(1st round Revise and Resubmit at the Journal of International Business Studies)