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Foreign competition and domestic innovation: evidence from US patents


Autor, David; Dorn, David; Hanson, Gordon H; Pisano, Gary; Shu, Pian (2020). Foreign competition and domestic innovation: evidence from US patents. American Economic Review: Insights, 2(3):357-374.

Abstract

Manufacturing accounts for more than three-quarters of US corporate patents. The competitive shock to this sector emanating from China’s economic ascent could in theory either augment or stifle US innovation. Using three decades of US patents matched to corporate owners, we quantify how foreign competition affects domestic innovation. Rising import exposure intensifies competitive pressure, reducing sales, profitability, and R&D expenditure at US firms. Accounting for confounding sectoral patenting trends, we find that US patent production declines in sectors facing greater import competition. This adverse effect is larger among initially less profitable and less capital-intensive firms.

Abstract

Manufacturing accounts for more than three-quarters of US corporate patents. The competitive shock to this sector emanating from China’s economic ascent could in theory either augment or stifle US innovation. Using three decades of US patents matched to corporate owners, we quantify how foreign competition affects domestic innovation. Rising import exposure intensifies competitive pressure, reducing sales, profitability, and R&D expenditure at US firms. Accounting for confounding sectoral patenting trends, we find that US patent production declines in sectors facing greater import competition. This adverse effect is larger among initially less profitable and less capital-intensive firms.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:September 2020
Deposited On:22 Jan 2021 17:06
Last Modified:22 Jan 2021 17:06
Publisher:American Economic Association
ISSN:2640-205X
OA Status:Green
Publisher DOI:https://doi.org/10.1257/aeri.20180481

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