We investigate how firms adapt to trademark protection, an extensively used but underexamined form of IP protection, by exploring a historical precedent: China’s trademark law of 1923 ‒ an unanticipated and disapproved response to end foreign privileges in China. By exploiting a unique, newly digitized firm-employee-level dataset from Shanghai in 1872-1941, we show that the trademark law shaped firm dynamics on all sides of trademark conflicts. The law spurred growth and brand investment among Western firms with greater dependence on trademark protection. In contrast, Japanese businesses, which had frequently been accused of counterfeiting, experienced contractions while attempting to build their own brands after the law. The trademark law also led to new linkages with domestic agents, both within and outside the boundaries of Western firms, and the growth of Chinese intermediaries. At the aggregate level, trademark-intensive industries witnessed a net growth in employment and the number of product categories. A comparison with previous attempts by foreign powers ‒ such as extraterritorial rights, bilateral treaties, and an unenforced trademark code ‒ shows that those alternative institutions were ultimately unsuccessful.
Contact: Klaus Keller