Patent statistics: A good indicator for innovation in China? Patent subsidy program impacts on patent quality

•We make a bibliometric analysis of patenting activities of Chinese LMEs.•Patent subsidy programs increase patent applications and grants by more than 30%.•Patent filing subsidies encourage filing of low-quality patent applications.•Grant-contingent rewards stimulate firms to narrow patent claims for easier grants.

Using a merged dataset of Chinese patent data and industrial survey data, we make a bibliometric analysis of patenting activities of Chinese large and medium-sized enterprises under local patent subsidy programs and test whether patent statistics are a good indicator of innovation in China. Our empirical results show that patent count is correlated with R&D input and financial output, which suggests that patent statistics are meaningful indicators. However, patent subsidy programs increase patent counts more than 30%. We emphasize the necessity of adjustments and provide a novel method of using the number of nouns in claims to quantify the claim scope, thereby overcoming the shortcomings of Chinese patent data that have no citations or lack well-documented patent claim information. We extend prior studies on patent subsidy programs by providing a detailed clarification of policy designs and their impacts and by evaluating policy impacts on both the quantity and quality of patent applications.