Do discretion criteria for patent administrative law enforcement encourage innovation among firms?

The management by administrative authorities of law violations represents one of the instruments for enforcing laws in China, the other way is lawsuit. The law allows administrative discretion to achieve efficiency but may lead to unfair law enforcement. Governments’ establishing patent administrative discretion criteria can deter unfair law enforcement by guiding administrators to determine administrative penalties. As such, a quasi-experimental approach testing the discretion criteria established by provincial patent administrative authorities was used in the current study to evaluate the impact of discretion criteria on law enforcement and innovation among firms. The empirical evidence shows that patent administrative discretion criteria increase the number of patent administrative law enforcement cases and encourage firms to apply for more patents, and this impact is larger for firms in industries where the new product market is broader, patent license fees are higher, patent rights easier to be infringed upon, and R&D duration is lengthier.