The efficient flow of innovative elements constitutes a core driving force for high-quality economic development. Guiding firms toward an open model of “working in collaboration” carries profound implications for the construction of a unified national market in the domain of intellectual property. Yet existing literature remains divided on whether intellectual property (IP) protection promotes or impedes inter-firm knowledge flow, owing to the competing logics of the “incentive effect” and the “impediment effect”.

Drawing on the open innovation theory and exploiting the staggered rollout of the national IP demonstration cities as a quasi-natural experiment, this paper employs a staggered DID model to systematically examine how strengthened IP protection affects inter-firm innovation knowledge flow. The results show that IP protection significantly promotes inter-firm innovation knowledge flow, as evidenced by a substantial increase in cross-citations of patents among firms within the same industry. The findings remain robust to a battery of identification checks. Mechanism testing reveals that IP protection operates through a dual-layer “meso-micro” channel: At the meso level, the policy enhances local governments’ strategic commitment to innovation and strengthens regional judicial IP enforcement, thereby creating institutional conditions conducive to inward knowledge absorption and outward knowledge openness, respectively; at the micro level, the policy activates firms’ internal cooperative culture, expands their external collaborative networks, and elevates human capital integration capabilities, thereby reinforcing the bidirectional flow of knowledge assets. Heterogeneity analysis demonstrates that firms in the growth and maturity stages, as well as in high-tech industries, benefit more substantially from the institutional dividends of IP protection. Further analysis shows that enhanced innovation knowledge flow facilitates corporate breakthroughs in key core technology domains, propelling innovation from scale expansion to quality advancement.

This paper contributes incremental evidence on the institutional effect of IP protection from the perspective of innovation knowledge flow, and offers important policy insights for advancing the internal circulation of innovative elements and constructing open and collaborative innovation networks.