Creating patents that claim non-existent technology is an unethical behavior that not only defames the creator of the patents but only discredits the citing patents, however, whether a credible creator can better diffuse knowledge by attracting more citations remains as an important question. Utilizing the staggered construction of the Social Credit System – a Big-data-based public policy designed by China’s government to share firms’ social credit information, we investigate the direct causal relationship between corporate credibility and knowledge diffusion through patent citations. Our findings highlight a significant increase in the number of patent citations among firms located in pilot areas that have implemented the social credit system, compared to those in other cities. We also find that the increase in trustworthiness and the reduction in corporate misconduct are two crucial mechanisms through which China’s social credit system affects patent citations. The above effect is more pronounced for patents cited domestically, firms covered by more analysts, firms receiving unqualified auditor’s opinion and non-state-owned firms. Overall, our results provide suggestive evidence that increased corporate credibility facilitates the knowledge diffusion, as suggested by corporate integrity and signaling theories.
