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Foreign competition and domestic innovation: evidence from U.S. patents


Autor, David; Dorn, David; Hanson, Gordon; Pisano, Gary; Shu, Pian (2017). Foreign competition and domestic innovation: evidence from U.S. patents. NBER Working Papers 22879, National Bureau of Economic Research.

Abstract

The competitive shock to the U.S. manufacturing sector spurred by rising China import competition could either catalyze or stifle innovation. Using three distinct sources of variation to identify rising trade exposure, we provide a causal analysis of the effect of surging import competition on U.S. innovative activities. Applying a novel internet-based matching algorithm to map all U.S. utility patents granted by 2013 to firm-level data, and carefully accounting for the shifting concentration of patenting activity across sectors, we document a robust, negative impact of rising Chinese competition on firm-level and technology class-level patent production. Accompanying this fall in innovation, global employment, sales, profitability, and R&D expenditure all decline within trade-exposed firms. The trade-induced contraction along all margins of adjustment and for all measures of valuation suggest that the primary response of firms to greater import competition is to scale back their global operations.

Abstract

The competitive shock to the U.S. manufacturing sector spurred by rising China import competition could either catalyze or stifle innovation. Using three distinct sources of variation to identify rising trade exposure, we provide a causal analysis of the effect of surging import competition on U.S. innovative activities. Applying a novel internet-based matching algorithm to map all U.S. utility patents granted by 2013 to firm-level data, and carefully accounting for the shifting concentration of patenting activity across sectors, we document a robust, negative impact of rising Chinese competition on firm-level and technology class-level patent production. Accompanying this fall in innovation, global employment, sales, profitability, and R&D expenditure all decline within trade-exposed firms. The trade-induced contraction along all margins of adjustment and for all measures of valuation suggest that the primary response of firms to greater import competition is to scale back their global operations.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:December 2017
Deposited On:11 Jan 2018 11:44
Last Modified:30 Jul 2018 05:06
Series Name:NBER Working Papers
Number of Pages:43
OA Status:Green
Publisher DOI:https://doi.org/10.3386/w22879
Related URLs:http://www.nber.org/papers/w22879

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