Does dialect difference impede patent transaction? Evidence from China's inter-city patent license data

This study provides an empirical investigation of technology transfer cost across China's cities by constructing a novel patent license database based on the changes in the patent legal status published by the State Intellectual Property Office of China. We leverage the dialect difference among China's cities to identify the impact of transaction cost on patent licensing. Our estimations employing the gravity model find the followings: First, the number of licenses between cities still decreases significantly with dialect distance after controlling for variables such as the geographical distance. Second, dialect distance does not affect patent licensing between related parties. Third, the dialect distance effect works mainly by affecting trust and contract cost because dialect dis-tance dampens trust, and the dialect effect is stronger for invention patents license and individual licensors. Fourth, the dialect distance effect does not appear to work through the communication and information mechanism because the dialect effect is independent of Putonghua popularity.