Import competition and firm innovation: Evidence from China

This paper investigates whether and how import competition affects firm innovation. Using China's World Trade Organization (WTO) accession as a quasi-natural experiment, we find that import competition reduces firm innovation, which is consistent with the Schumpeterian effect. We also find hete...

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Bibliographic Details
Published in:Journal of development economics 2021-06, Vol.151, p.102650, Article 102650
Main Authors: Liu, Qing, Lu, Ruosi, Lu, Yi, Luong, Tuan Anh
Format: Article
Language:English
Subjects:
Escape-competition effect
Firm innovation
Import competition
Preference effect
Schumpeterian effect
Spillover effect
Trapped-factor effect
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Summary:This paper investigates whether and how import competition affects firm innovation. Using China's World Trade Organization (WTO) accession as a quasi-natural experiment, we find that import competition reduces firm innovation, which is consistent with the Schumpeterian effect. We also find heterogeneous treatment effects across firm productivity and patent types in a way consistent with preference and knowledge spillover effects, but not with escape-competition and trapped-factor effects.
ISSN:0304-3878
1872-6089
DOI:10.1016/j.jdeveco.2021.102650