Intellectual Property Pledge Financing and Enterprise Innovation: Based on the Perspective of Signal Incentive

Abstract

As a driving force behind urban sustainable development, enterprise innovation has become an increasingly important issue in the digital economy. In this context, a financing model called intellectual property pledge financing (IPPF) has been widely implemented, potentially promoting innovation output in developed countries. However, for countries with relatively low levels of intellectual property (IP) protection, the impact of IPPF on enterprise innovation is divergent, as it may lead to patent signal failure. China’s implementation of IPPF since 2008 provides an ideal quasi-natural experiment for researching IPPF in such countries. Using panel data of China’s listed companies from 2007 to 2017, we employ the staggered Difference-in-Differences (DID) method to examine the impact of IPPF on enterprise innovation. The results demonstrate a significantly positive impact overall, with a more pronounced effect in urban areas characterized by high intellectual property protection and digitalization. Various robust tests, including event study, Bacon decomposition, and propensity score matching (PSM), were conducted. Additionally, our findings suggest that IPPF facilitates enterprise innovation by expanding external credit resources and optimizing internal management from the perspective of open innovation (OI). It signals banks and investors to provide favorable credit support externally, helps alleviate managerial myopia, and increases manager risk preference internally. These results offer empirical evidence and suggestions for promoting IPPF as a means to stimulate enterprise innovation and achieve urban economic sustainable development.