Import Competition and Firm Innovation: Evidence from China
17 Pages Posted: 23 Mar 2021 Last revised: 27 Mar 2021
Date Written: March 22, 2021
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.
Keywords: Import competition, Firm innovation, Schumpeterian effect, Spillover effect, Preference effect, Escape-competition effect, Trapped-factor effect
JEL Classification: F12, F13, F14, F15, L11, L13, O31
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