Quantity vs. Value: Divergent Innovation Outcomes Under Chinese Import Pressure

Lie, Erik; Yang, Keyang Daniel

doi:10.2139/ssrn.5243634

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Quantity vs. Value: Divergent Innovation Outcomes Under Chinese Import Pressure

SMU Cox School of Business Research Paper No. 25-14

36 Pages Posted: 7 May 2025

See all articles by Erik Lie

Erik Lie

University of Iowa - Henry B. Tippie College of Business

Keyang Daniel Yang

Southern Methodist University (SMU) - Finance Department

Date Written: May 06, 2025

Abstract

We explore the impact of Chinese import competition on innovation in U.S. manufacturing firms. Our analysis uncovers a striking divergence in innovation outcomes: although firms boost their patent output, the economic value and technological significance of these patents decline. More specifically, the firms transition from groundbreaking inventions to a series of incremental advancements aimed at differentiating their product lines. Our findings reconcile two foundational views on competition and innovation-one emphasizing rent erosion and the other innovation stimulation-by showing that competitive pressure can simultaneously encourage more innovation while reducing its economic value.

Keywords: Chinese import competition, Innovation, Product differentiation, Trade and innovation, Globalization

JEL Classification: O31, F14

Suggested Citation: Suggested Citation

Lie, Erik and Yang, Keyang, Quantity vs. Value: Divergent Innovation Outcomes Under Chinese Import Pressure (May 06, 2025). SMU Cox School of Business Research Paper No. 25-14, Available at SSRN: https://ssrn.com/abstract=5243634 or http://dx.doi.org/10.2139/ssrn.5243634