Does Intellectual Property Pledge Financing Pilot Policy Promote Urban Innovation Capability?Evidence from a Quasi-Natural Experiment in China

Peng Xiaobao,Chen Wenqing

(School of Public Affairs,University of Science and Technology of China,Hefei230026,China)

Abstract:As an organic combination of intellectual property(IP)and finance,China's pilot policy of IPpledge financing helps to promote the application and marketisation of intellectual property and plays an important role in promoting urban development.This study takes the pilot policy as a quasi-natural experiment.Based on the panel data of 263 cities from 2001 to 2016 in China,the difference-in-differences method is used to analyse the impact and mechanism of the pilot policy of IPpledge financing on urban innovation capability.The analysis results show that the pilot policy not only directly promotes innovation capability but also improves it indirectly by increasing the fiscal expenditure on science and technology and enhancing human capital.Furthermore,the impact of the pilot policy on urban innovation capability is significantly heterogeneous under different city levels:the lower the city level,the more significant the innovation effect.However,no heterogeneous effects were seen under different government efficiencies.This study provides strong support for promoting the pilot policy and supplies important data for exploring new paths to improve urban innovation capabilities.

Keywords:intellectual property pledge financing policy;urban innovation capability;difference-in-differences

1 Introduction

Innovation has become an internal driving force leading the development and important support for building a modern and powerful country[1].Innovation can transform the traditional factor-driven economic growth mode into an innovation-driven development mode,and innovation can achieve continuous qualitative breakthroughs in the development of momentum,which is the best way to seek optimal solutions under multiple constraints[2].As the basic unit of innovation activities,cities are the gathering place of innovation elements.With the development of the knowledge economy,improving urban innovation capability is an inevitable choice to move towards a high-quality stage,and that is also the primary task and necessary move in the current stage.

Urban innovation is considered of great importance and has attracted continuous attention.In the existing literature on urban innovation,the public policy stands out as a crucial contextual factor that profoundly impacts innovation capability[3].Innovation is inseparable from the regulation of the invisible hand of the market,associated with the support and guidance of government policy as well.Unlike the establishment of innovative cities in Western countries,the construction and development of cities in China are more dependent on the call of central and provincial governments.Government policy impetus is the key element to enhancing innovation capability.Therefore,it is of great practical significance to study the innovation effect of certain public policy implementation to explore the development path to enhancing urban innovation capability.

On the one hand,as the world's competitive landscape evolves,intellectual property is becoming an increasingly important strategic resource,and emerging literature investigates the linkage between intellectual property and innovation[4].Scholars have approached the analysis from different perspectives,but no unified conclusion has yet been reached.Some scholars found that intellectual property has significant positive effects on innovation[5].Intellectual property is crucial to innovation and further research.On the other hand,facing the problems of large funding requirements and great uncertainty in innovation activities,the primary obstacle for innovators is financing[6].As an important financial approach,pledge financing can alleviate the financing dilemma.As early as the early twentieth century,Schumpeter pointed out that finance and innovation are closely related,and finance is the foundation and catalyst of technological innovation.

As a new financing method,intellectual property pledge financing has widely discussed currently,and it plays an important role in leading urban innovative development[7].Unlike traditional fixed asset financing,intellectual property pledge financing can effectively revitalise the value of intangible assets and promote the application and marketisation of intellectual property,thereby relieving the financial pressure in the innovation process and enhancing the urban innovation activity and innovation environment[8].The combination of science,technology,and finance is the only developing way to implement the innovation-driven development strategy,build an innovation-driven country,and achieve a high level of self-improvement.

Intellectual property pledge financing belongs to the category of civil law.The parties to the contract are equal in form,but not all of them are equal in substance.Taking enterprise intellectual property pledge financing as an example,under the condition of a complete market economy,whether to conclude the financing contract of intellectual property pledge completely depends on the will of both parties.At present,in China,the status of banks and enterprises is essentially unequal,and the conclusion of intellectual property pledge financing contract or not mainly depends on banks,enterprises are in a weak position,while banks are in a strong position.In addition,it is difficult for commercial banks to overcome and avoid the multiple risks of policy,technology,market,and so on in intellectual property pledges.The risk of carrying out intellectual property pledge loans is high,and the cost of supervision is high[9].Therefore,commercial banks have low enthusiasm for intellectual property pledges and loan business.Facing problems that cannot be solved solely by the market,the government should adopt promoting policies to encourage the development of intellectual property pledge financing business.Since the implementation of the pilot policy of intellectual property pledge financing in 2008 in China,that pilot policy has made great progress as a policy tool for the country to promote the use of intellectual property rights and encourage innovation.The amount of pledge financing of patents has reached 470.5 billion yuan.This pilot policy is not only a hot spot in the field of practice,but also a wealth of research on it has been carried out in the academic field.

In the literature,scholars mainly discuss the impacts of intellectual property policy or financial policy on urban innovation separately.Few studies have explored the impact of intellectual property pledge financing policy on urban innovation from the perspective of the combination of intellectual property and finance.The intellectual property pledge financing policy is a policy tool for the state to promote the use of intellectual property,and it is a key measure to support the construction of innovative cities.Also,previous research on intellectual property pledge financing policy mainly focuses on qualitative research from the aspects of intellectual property pledge financing mode,risk,laws,and practical effects.Research is lacking on quantitative methods to analyse the implementation effect of the intellectual property pledge financing policy.Cities are important carriers of innovation activities and the basic unit of regional innovation.However,the literature lacks research on the impact of intellectual property pledge financing policies on urban innovation capabilities at the micro level.Therefore,our study examines the relationship between intellectual property pledge financing policy and urban innovation capability,and we explore the mechanism between them.

This study makes several contributions.First,based on the theory of technological innovation and from the perspective of intellectual property finance,this study explores the impact and mechanism of China's pilot policy of intellectual property pledge financing on urban innovation capabilities,which enriches knowledge about the antecedents of urban innovation capability.Second,this study regards the intellectual property pledge financing pilot policy as a quasi-natural experiment and uses the difference-in-differences(DID)method to evaluate the innovation effect brought about by implementing the pilot policy,which is more scientific and reasonable than previous assessment methods.Third,this study takes the heterogeneity of city-level and government efficiency into consideration and verifies the role of pilot policy in promoting urban innovation capability under different circumstances.Finally,this study provides an important theoretical basis and reference for the better promotion and implementation of the intellectual property pledge policy in China.

The rest of this paper is structured as follows.Section 2 reviews several strands of literature and proposes the research hypotheses.Section 3 describes the data and methods used in the study.Section 4 presents the empirical results about the effect of the intellectual property pledge financing policy on urban innovation capacity,while also conducting robustness checks and exploring the mechanism effects and heterogeneity.Section 5 concludes the paper.

2 Theory and Hypotheses

2.1 IP Pledge Financing Policy and Urban Innovation Capability

The process of innovation requires many resource elements,and funding has become the most direct and prominent issue in the process of innovation[10].If a way to break through the financing dilemma cannot be found,innovators will be hard to survive.With the development of knowledge and technology,the era of the knowledge economy is booming,and IP has gradually become the key result of innovation activities.However,traditional financial institutions usually prefer to lend funds to innovators with more tangible assets to reduce the risk of loan defaults,and they are not willing to accept loans and pledges from innovative entities based on IP.The intervention of the IP pledge financing policy clarifies the value of intangible assets represented by IP,transforms IP into tangible assets,effectively revitalises the value of IP,and eases financing constraints[11].As well,through the intervention of the pilot policy,the government has achieved a high degree of integration of finance and IP,transformed knowledge and technology into efficient productivity,improved the efficiency of urban R&D,and promoted the improvement of urban innovation capabilities.

Secondly,the Chinese central government introduced and promoted the pilot policy,which once again emphasised the importance of IP finance.However,IP and finance originally were considered two separate fields,and there are inherent gaps in the publications about them.It is naturally difficult for financial institutions to define the connotation and value of IP.Through the intervention of the pilot policy,the government makes IP with a certain degree of openness act as a financing signal,which can reduce the information asymmetry between IP owners and financial institutions in an open market and help optimise the market transaction environment[12].A high-quality market environment can help financial institutions identify the value of IP and the relevant information of IP owners more clearly,reduce the potential risk of untrustworthiness,and enable the pledged funds to be better invested in R&D[13].From a certain perspective,the IP pledge financing pilot policy can optimise the urban innovation environment,promote the transformation of scientific and technological innovation achievements,and improve the development of innovation activities.

Based on the above analysis,this study proposes the following hypothesis.

H1:The IP pledge financing pilot policy improves urban innovation capacity.

2.2 Mechanism of IP Pledge Financing Policy on Urban Innovation Capacity

IP pledge financing is an emerging business form based on the development of IP and finance.Compared with traditional pledge financing,IP pledge financing has greater flexibility,efficiency,and opportunities.Combined with Schumpeter's innovation theory,IP pledge financing can be interpreted as a comprehensive innovation form of financial function combined with knowledge and technology development,integrating technological innovation and resource allocation innovation.Thus,the impact of the IP pledge financing policy on urban innovation capacity is mainly reflected in the two mechanisms of science and technology financial expenditure and human capital allocation.The mechanism of impact is shown in Figure 1 below.

Figure 1 Mechanism of IP Pledge Financing Policy on Urban Innovation Capability

2.2.1 Mechanism of Fiscal Expenditure of Science and Technology

Innovation is the core of promoting national development and social transformation and upgrading,and fiscal expenditure is the accustomed method used by the government to promote innovation.Thus,fiscal expenditure is the foundation of the modernisation of national governance.The government meets social public needs by providing public goods or services,which helps to promote national economic development and social reform[14].

In China,the IP pledge financing pilot policy emphasises that to give full play to the role of the government,government departments should strengthen cooperation with relevant departments,establish and improve the risksharing mechanism for IP pledge financing,promote the capitalisation and industrialisation of IP,provide strong support for economic and social development,and promote the sustainable development of IP pledge financing.After the central government introduced the pilot policy in 2008,local governments also formulated corresponding fiscal measures.For example,the Beijing municipal government launched a loan discount program for qualified hightech enterprises and cooperated with financial institutions to undertake loan risks for pledge financing business[15].Therefore,implementing the IP pledge financing pilot policy means that pilot cities increase the proportion of scientific and technological financial expenditures to make the policy more effective.

Fiscal expenditure on science and technology is the most direct way for the government to intervene in the field of technological innovation[16].Since the products of innovation activities have the attributes of public goods,the privatisation benefits of innovators'return are low,which will reduce the enthusiasm of urban innovators.With the help of science and technology financial expenditures,the government can reduce the externality of the benefits of innovation activities,decrease the cost of innovation,and ease the financial pressure,which will enhance the enthusiasm of innovators,and then promote the development of urban innovation activities[17].Besides,the increased financial expenditure in the field of science and technology indirectly shows the government's recognition of the technological skills and capabilities of innovators[14].The government's endorsement is conducive to innovators obtaining more investors and social funds[18].Therefore,by increasing financial expenditures on science and technology,pilot cities can enhance the activity of urban innovation,thereby promoting urban innovation and development.

Based on the above analysis,this study proposes the following hypothesis.

H2:The IP pledge financing pilot policy improves urban innovation capacity through the mechanism of increasing fiscal expenditures on science and technology.

2.2.2 Mechanism of Human Capital

Human capital is the foundation of innovation and the internal driving force for sustainable urban development,especially highly skilled talents[19].Talented workers are an important resource for improving urban innovation capabilities,and the level of human capital directly determines a city's innovation capabilities.Good financial development conditions are an important prerequisite and foundation for a city to attract talents[19].People tend to live in cities with an open financial development environment,which is why talent is mainly concentrated in economically prosperous cities.The total number of innovative talents in a country is limited,so if a city can attract more talents,then that city's innovation capability is higher.Talents are the foundation of urban development.To improve urban innovation capability,it is necessary to have sufficient talent reserves,and the extent of these reserves cannot be separated from the cooperation and support of government policy.

The introduction of the IP pledge financing policy has brought open financial development conditions for the city,which have become an important pulling force to attract high-level talents.Due to the improvement of the business environment brought about by the pilot policies,high-level talents have been gathered,forming talent pools[20].When a city forms a talent aggregation effect,the universities and research institutes in the city have more opportunities to hire and contact more high-quality talents,which contributes to increasing the absolute amount of human capital and thereby enhancing the innovation capability of the entire city[21].

As a direct input factor,talents can improve urban innovation ability because they have a deep understanding of the risks and benefits of project research and development,keen insight into the market and industry trends,and an extensive understanding of the actual local situation.Therefore,with the help of such talents,innovators can allocate the funds from pledge financing more reasonably and improve the efficiency of the funding efforts.Moreover,talents carry new knowledge and new technologies with them,and the level of human capital also determines the speed of technology absorption[3].The more human capital has accumulated in a city,the stronger the city's ability to digest,absorb,and imitate,and the higher the levels of learning and creating new technologies,all of which promote urban innovation capability.At the same time,talents can seize new external opportunities,make good use of new resources,and integrate new knowledge and technology with existing knowledge and technology effectively,which is invaluable to the city.

Based on the above analysis,this study proposes the following hypothesis.

H3:IP pledge financing pilot policy improves urban innovation capacity through the mechanism of enhancing human capital.

3 Research Design

3.1 Data Sources

In this study,we regard the IP pledge financing pilot policy as a quasi-natural experiment and use the method of multi-period DID to test the impact of the IP pledge financing policy on urban innovation capacity.We select the panel data of 263 cities in China from 2001 to 2016 as a sample,of which 18 cities have implemented the pilot policy.The pilot policy was introduced in 2008,and the first batch of six pilot areas included Beijing,Changchun,Nanchang,and others.In 2009,2010,and 2012,pilot projects were carried out again in batches,list of pilot cities is shown in Table 1 below.The implementation of the pilot policy has moved IP pledge financing from theory to large-scale application,and it has become a relatively fast-growing new financing method.

Table 1 List of Pilot Cities for IP Pledge Financing Policy in China

The term'urban innovation capability'comes from the Report on Innovation Capability of China's Cities and Industries 2017 released by Fudan University's Industrial Development Research.The urban innovation index is a widely used measurement method in the academic community,which is also recognized as a rigorous and reliable measurement method.The index is calculated only up to 2016 and has not been updated for subsequent years.The core explanatory variable is the dummy variable of the IP pledge financing policy,and the list of pilot cities is from the official website of the State Intellectual Property Office.The rest of the data comes from the annual statistical bulletin of each city,the CNRDSdatabase,and the EPSdatabase.The data analysis software used was Stata 16.0.

3.2 Modelling

Since the pilot policy advanced in stages,this study constructs a multiperiod DID model[22].The 18 pilot cities between 2008 and 2012 are used as the treatment group,and the other non-pilot cities in the sample cities are used as the control group.We set two dummy variables:treat and post.The dummy variable treat equals 1 indicates that the city is a pilot city for IP pledge financing;otherwise,treat equals 0.The time dummy variable post equals 1 in the year that the city was established as the pilot city and the following years;in previous years,post equals 0.This study constructs the following econometric model to test the impact of the pilot policy of intellectual property pledge financing on urban innovation capability.

In the above equation,lninnoi,tdenotes the urban innovation capacity,representing the innovation output of cityiin yeart.Parameterpolicyi,tdenotes the intersection of the pilot policy dummy variable and the time dummy variable multiplier,andconti,tmeans a series of control variables that could affect urban innovation capacity.The influence of IP pledge financing on urban innovation capacity is modelled byα1.The influence of control variables on innovation is modelled byα2.This study uses fixed effect panel data analysis in our baseline analysis,testing the association between IP pledge financing and innovation.Considering the different economic policies and geographical conditions of different cities in China,this study controls for the fixed effect of cities.Also,we control for the fixed effect of years.Finally,∊i,tdenotes a random error term.

Further,this study explores the mechanism of intellectual property pledge financing policy on urban innovation capability.For the testing and analysis of the mediating effect,we adopt the stepwise regression method to deeply study the mediating effect of the financial expenditure of science and technology and human capital.We use the following regression model.

In formulas(2)and(3),inprepresents the financial expenditure for science and technology,andhumrepresents the expenditure for human capital.The mediation test mainly focuses on the significance ofβ1andλ2.If both are significant at the same time,it means that the financial expenditure of science and technology or human capital plays a mediating role;that is,the pilot policy can not only directly affect the urban innovation capability,but also affect the fiscal expenditure on technology or the level of human capital,and thus indirectly affect the urban innovation capability.

3.3 Variable Measurement

3.3.1 Explained variable

The explained variable in our study is urban innovation capacity(lninno).The measurement of urban innovation capability directly determines the reliability of empirical results.At present,there are two main types of measurement of urban innovation capability:one is to measure the number of patent applications or grants in the city[23],and the other one is to use the urban innovation index[24].By comparing these two methods,it can be found that the method of measuring by patents is simple and convenient,but it is not rigorous and normative enough,and there are certain deficiencies.The urban innovation index,proposed by Chinese scholars,is a commonly used measurement method in academia,and it is recognised as a rigorous and reliable measurement method.It is based on the patent data released by the State Intellectual Property Office,using a patent update model to estimate the patent value.This method estimates the average value of patents per age,which not only considers the innovation ability measured by patents but also introduces the entrepreneurial ability measured by the number of newly registered enterprises.Therefore,we use the urban innovation index as a measure of urban innovation capability.For our study,the innovation indices of more than 300 prefecture-level cities in China were obtained,covering 2001 to 2016.

3.3.2 Explanatory variable

The pilot policy of IP pledge financing indicated using the form of dummy variables(policyit),is by the multiplicative product of the group dummy variable and the time dummy variable for each cityiand yeart.Each is defined as 1 in the year in which the pilot policy is implemented in that city and subsequent years;otherwise,it is 0.

3.3.3 Control variables

We also include control variables that may influence the urban innovation capacity.The following five control variables of city-level characteristics are introduced to control for their impact on urban innovation capacity:gross regional product per capita(lngdp_per),financial structure(fin),industrial structure(ind),R&D investment intensity(RD)and foreign direct investment(fdi).

4 Empirical Results

4.1 Baseline Regression

Using the above model,multiperiod DID estimation can be performed on the sample.This section discusses the relationship between the IP pledge financing policy and urban innovation capability,and the basic statistical results are shown in Table 2 below.Model 1 is the regression result controlling for the time-fixed effect.Model 2 adds control variables onto the base Model 1.We see that the regression coefficient of the policy dummy variable decreases,showing that the addition of control variables reduces the estimation error of the policy effect.Based on Model 2,Model 3 additionally controls for the fixed effect of individual cities,and the regression coefficient of the core explanatory variable is still significantly positive,indicating that the pilot policy improved urban innovation capabilities significantly.

Table 2 Baseline Results

4.2 Parallel Trend Check

The baseline analysis revealed that the pilot policy of IP pledge financing has a significant positive impact on urban innovation capacity.However,this conclusion is based on the important premise that no significant difference existed between the treatment group and the control group before the pilot policy was implemented.Therefore,we establish a test model to test for parallel trends and use the year of the first pilot as the base year,redefine the sample time,and then estimate the difference in the innovation capabilities of the pilot cities before and after the base year.

We useβkto represent the difference in innovation capability between pilot cities and non-pilot cities in different years.Ifβkis not significant before the base year,then there is no significant difference between the pilot city and other cities before the implementation of the pilot policy.If the coefficient ofβkis significant after the base year,then the pilot policy substantially impacted the innovation capacity of the pilot cities.

Figure 2 below shows the changes in the regression coefficientβkof the core explanatory variables under the 95%confidence interval for four years before and after the base.It can be seen from the figure that when-4≤k≤-2,the regression coefficientβkis very close to 0,and its 95%confidence interval also contains zero values,indicating thatβkdoes not differ from zero significantly.Since the policy has a certain lag,after the second year of policy implementation,that is,when k＞1,the regression coefficient of the pilot policy increases significantly This means that before the implementation of the pilot policy,there was no obvious difference in the innovation ability between cities,which meets the preconditions for the parallel trend test.

Figure 2 Parallel Trend Check

4.3 Placebo Check

This study selected 18 cities from the 263 sample cities randomly and set them as the pseudo-treatment group while the other cities were the control group for a placebo test.At the same time,to avoid the influence of small probability events,the above process was repeated 500 times at random.As can be seen from Figure 3 below,the p-value of the regression coefficients of most pseudo-pilot policies is greater than 0.1.Meanwhile,the actual regression coefficient of 1.012 is obviously far away from the randomly selected regression coefficient,indicating that the improvement of urban innovation ability brought about by the pilot policy is not an accident.

Figure 3 Coefficient Distribution of Selected Experimental Groups Randomly

4.4 Robustness

4.4.1 Propensity Score Matching

To fully demonstrate the effect of the pilot policy on IP pledge financing,the government may give priority to cities with better basic resources or a good level of financial development for pilot projects.That is,the selection of pilot cities is not completely random.To control this endogeneity problem,this study uses the Probit model to estimate the propensity score for matching.

The essential core of the propensity score matching method is to find a certain city A among the cities without the pilot policy,which is similar to city B with the pilot policy in terms of control variables to the maximum extent,that is,X_A=X_B.The goal is to find these two cities have roughly the same characteristics.So,the probability of implementing the intellectual property pledge financing policy between these two cities is relatively close.Previous studies have shown that only when the absolute value of the deviation rate of the matched observable variable does not exceed 20%can it meet the matching requirements.Table 3 shows the comparison.After matching,the deviation rate of each matching variable in the experimental group and control group decreased,and the deviation rate of most variables was less than 5%,meaning that the matching variables were already very close.Secondly,after matching,the P-value of each variable changes from less than 0.1 to more than 0.1,which indicates that the result of the t-test does not reject the null hypothesis.After Propensity Score Matching(PSM)treatment,there was no significant difference between the experimental group and the control group.

Table 3 Propensity Score Matching Results

After conducting PSM,we conduct a regression test on the effect of the pilot policy.The specific results are shown in Table 4.It can be seen that whether or not control variables are added,the regression coefficients of both policies are positive and significant.Therefore,the previous baseline regression results are reliable.

Table 4 Robustness Check Results

4.4.2 Controlling Other Similar Policy Shock

In the process of estimating the impact of the pilot policy on urban innovation capability,there will inevitably be interference from other policy influences,which may lead to overestimated or underestimated policy effects.Therefore,we control for similar policies,and the policy most relevant to this study is the innovative city pilot policy.Building an innovative city is the foundation and pillar of an innovative country,and in the sample of this study,several cities have conducted pilot projects related to being innovative cities.Therefore,it is reasonable to believe that various measures of the innovative city policy have promoted the improvement of urban innovation capacity,which may lead this study to overestimate the innovation effect brought by the pilot policy.Therefore,we retain the cities that implemented the pilot policy of IP pledge financing in 2008 and later only,excluding possible interference from other policies.According to Model 6 in Table 4 above,after controlling for the impact of innovative urban policies,the regression coefficient of the pilot policy is still significantly positive,which indicates that the conclusion of the baseline regression is still valid.

4.4.3 Lag Control Variables

In addition to the endogeneity problems caused by the pilot policy itself,this study also conducted an endogeneity test on the control variables.First,we lag all control variables by one period,and then we perform the regression test again.As shown in Table 4 above,the regression coefficient for Model 7 is significantly positive.Compared with the coefficient of the baseline regression,the regression results are basically unchanged.That indicates that Hypothesis 1 is reliable and robust.

4.5 Mechanism

First,we examine the mediating effect of fiscal expenditure on science and technology.The results are shown in Models 8 to 10 in Table 5 below.In Model 8,the regression coefficient is significantly positive,which is consistent with the previous results.In Model 9,the regression coefficient is significantly positive,indicating that the pilot policy leads to an increase in fiscal expenditure on science and technology in cities.Finally,the financial expenditure and the policy effect are included in Model 10,and it is found that the regression coefficients are both significantly positive,indicating that the pilot policy can indirectly improve the urban innovation capability,but also improve it by affecting the financial expenditure of science and technology.To sum up,Hypothesis 2 passed the verification testing.

Table 5 Mediation Effect of Fiscal Expenditure and Human Capital

Next,we test the mediating effect of human capital.The results are shown in Models 11 and 12 in Table 5 above.In Model 11,the regression coefficient is significantly positive,indicating that the pilot policy is positive for gathering talent and enhancing human capital.Then,the variables of human capital and pilot policy are included in Model 12,and it is found that the regression coefficients of both are significantly positive,which indicates that the pilot policy can not only directly promote urban innovation ability,but also improve the innovation capability by influencing the human capital of cities.To sum up,Hypothesis 3 is verified.

4.6 Heterogeneity

4.6.1 City Level

The innovation ability of a city is generally closely related to the city hierarchy,which may lead to a large difference in the effects of the same policy in cities of different levels.In other words,the city hierarchy is an important factor affecting the city's innovation capability[25].In China,the problem of imbalance and insufficiency among cities is particularly serious.High-level cities have obvious location advantages in terms of factor resource acquisition,human capital stock,economic development,and technological innovation capabilities,and thus have higher innovation capabilities.Referring to previous research,city levels are divided into two categories,namely high-level cities and low-level cities[26].Among them,high-level cities include municipalities directly under the central government,provincial capitals,sub-provincial cities,and larger cities,with the rest considered low-level cities.

According to Models 13 and 14 in Table 6 below,the impact of the pilot policy on urban innovation capability is obviously heterogeneous at different city levels.The higher the city level,the more obvious the promotion effect.We suppose that the main reason for this is that in the context of China,the central government will have a certain policy inclination when dividing resources;it is inclined to give more support to high-level cities.Due to the obvious advantages of high-level cities in terms of economic development level,education level,and policy support,excessive concentration of innovation resources leads to insufficient utilisation of resources.Therefore,for high-level cities,the pilot policy has less marginal utility,which means it is the'icing on the cake'.Low-level cities do not have such inherent advantages,so the government's policy intervention is more like'fuel in snowy weather',and the innovation effect will be more significant.

Table 6 Heterogeneous Effect of City Level and Government Efficiency

4.6.2 Government Efficiency

Government plays a key role in the process of policy piloting and implementation,but due to the differences in the motivation,capacity,and efficiency of governments,the effect brought by the implementation of the policy varies greatly between regions[27].Whether the government has sufficient capacity to introduce and implement policies and measures for market and industrial development is an important factor affecting the effect of the pilot policy,and we model this capacity as government efficiency.Referring to previous research,total factor productivity is used to represent government efficiency,and cities are divided into two groups by the initial average from 2001 to 2009 before the implementation of the pilot policy:high government efficiency and low government efficiency[28].

As can be seen from Models 15 and 16 in Table 6,whether a city has high government efficiency or low government efficiency,the regression coefficient indicates a significant positive impact on urban innovation capacity.However,judging from the coefficients of the regression results,the regression coefficients of cities with high government efficiency are larger;that is,the innovation effect brought about by the pilot policy is more significant when implemented in cities with high government efficiency.We hypothesise that the main reason for this is as follows.First,although China is vigorously promoting the construction of a strong IP country,IP pledge financing is still in its infancy,and the development of IP pledge financing is faced with a lack of high-end human capital and technological innovation.The phenomenon of low efficiency in the transformation of scientific and technological achievements leads to the phenomenon that whether cities have high government efficiency or low efficiency,the IP pledge financing policy positively and significantly improves the urban innovation capabilities.Secondly,high-efficiency governments are acutely aware of actual local conditions,so they can formulate measures in line with local development.Inefficient governments may formulate correspondingly appropriate measures,but they have little ability to promote and implement them effectively,resulting in the pilot policy being unable to play its due role in cities with low government efficiency.

5 Conclusion Future Research

The pilot policy of IP pledge financing is an important policy launched in the process of high-quality development in China.It has the potential to promote the application and marketisation of IP,unlock the value of IP,and point out the financing difficulties in the process of innovation.Based on this,this study regards the pilot policy as a quasi-natural experiment and uses the panel data of 263 Chinese cities from 2001 to 2016,the multiperiod DID method is used to explore the impact of the IP pledge financing pilot policy on urban innovation capability.We also investigate the mechanisms driving the impacts.

Firstly,our analysis shows that the pilot policy of IP pledge financing has effectively promoted the improvement of urban innovation capacity,and this conclusion still holds after considering the preconditions of DID and other factors that may interfere with the results.The emergence of IP pledge financing has promoted the application and marketisation of IP,realised the transformation of IP into assets,maximised the value of IP,promoted the transformation of knowledge and technology into productivity,and enhanced the innovation capability of the entire city.Secondly,fiscal expenditures of science and technology and human capital play an intermediary role between the pilot policy and urban innovation capability.The governments of pilot cities increased their proportion of financial expenditures on science and technology,reduced innovation costs,and eased financial pressure,thereby promoting the development of urban innovation activities and the improvement of capacity.Thirdly,the pilot policy has brought a high-quality business and innovation environment,which has become an important force for attracting talent.Highly skilled talents can absorb,digest,transform,apply,and create new knowledge.The higher the human capital level,the stronger the city's innovation capability.Finally,the promotion effect of pilot policies on urban innovation capacity had a heterogeneous impact at different city levels.That is,the lower the level,the more significant the innovation effect brought by the pilot policy.In addition,this promotion effect is not heterogeneous under different government efficiencies;rather,the innovation effect brought about by the pilot policy was more significant in cities with high government efficiency.

The study provides a new perspective for improving urban innovation capabilities.To promote the effectiveness of the pilot policy,this study puts forward the following policy suggestions for city government.First,increase the introduction and cultivation of talents in pilot cities to ease the constraints of human capital encountered by cities in the process of development.The government should establish a flexible and diverse talent introduction mechanism.To enhance the urban human capital accumulation and meet the diverse and innovative needs of different human capital,governments should continuously improve the city's living and working environment for talents,and enhance the urban attractiveness to talents.When introducing talents,the government should pay attention to the cultivation of scientific and technological innovation talents;this will improve the human capital of cities and even whole regions.

Secondly,promote the construction of a financial mechanism for IP pledge financing to improve financing efficiency.As a provider of public goods and services,the government should increase investment in science and technology financing,continuously improve the fiscal expenditure mechanism,and take advantage of the effect of fiscal expenditure.At the same time,the governments should guide and encourage innovators to apply for loans from financial institutions with IP as collateral and increase support for innovators who urgently need funds.This can be done by establishing mechanisms,such as interest-free loans,to drive innovation in the entire city,promote enthusiasm and motivation,and thereby enhance the innovation capability of the entire city.

Thirdly,gradually improve the IP pledge financing policy system.The process of pledge financing will inevitably involve the definition and evaluation of IP value,and its quantitative evaluation will involve many aspects such as the market and available technology.Therefore,establishing a professional,accurate and efficient realisation value evaluation system is a key link in promoting the IP pledge financing policy.Although local governments have issued relevant policies or documents,many legal issues are still involved,and the development of the IP legal system still needs to be further improved.

We identify some limitations of our study and discuss directions for future research.Firstly,this study is based on time series data for analysis,but due to the spatial correlation of urban innovation agglomeration activities,knowledge and technology between different cities may spill over and penetrate each other.Therefore,spatial factors can be incorporated to enhance the persuasiveness of the research in future research.Second,there are other measurement methods for the measurement of urban innovation capability,such as the number of patent applications,the number of grants,or the number of citations in the city.Therefore,other measurement methods can be used to increase the reliability and robustness of the research conclusions.