Do Exporting Firms in the People’s Republic of China Innovate?

Abstract

This paper assesses factors driving firm-level export performance in Asia’s super exporter - The People’s Republic of China (PRC). While early studies suggested that innovation was important, there has been little research on opening up the black box of technology at firm-level in the PRC, the author undertakes econometric analysis of innovation, learning, and exporting in automobiles and electronics firms in the PRC using a large-scale dataset to identify the most appropriate innovation proxy. Drawing on recent literature on innovation and learning in developing countries, it tests two alternative proxies: (i) a technology index (TI) to capture a variety of minor activities involved in using imported technologies efficiently; and (ii) the research and development (R&D)-to-sales ratio, which represents formal technological efforts to create new products and processes, often at world frontiers.

Keywords: prc, innovation, automobiles, electronics

JEL Classification: F23, O31, O32, L63, O57