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Globalization of Work and Innovation: Evidence from Doing Business in China

77 Pages Posted: 2 Jun 2015 Last revised: 17 Jun 2017

Jan Bena

University of British Columbia - Sauder School of Business

Elena Simintzi

University of British Columbia

Date Written: May 30, 2017

Abstract

We study how access to “cheap” offshore labor due to the 1999 U.S.-China bilateral agreement affects U.S. firms’ innovation. To this end, we decompose innovations into new goods (product innovations) and new production methods (process innovations). We find that U.S. firms operating in China decrease their share of process innovations by 12% and that this adjustment is purely driven by a lower quantity of process innovations. We obtain the same result using the inter-temporal variation in ownership restrictions on foreign investment in China across industries. Our findings suggest that using cheap and abundant offshore labor substitutes for labor-saving innovation.

Keywords: Globalization of work, technological change, product and process innovation, labor-saving innovation, China

JEL Classification: O33, J31, L23

Suggested Citation

Bena, Jan and Simintzi, Elena, Globalization of Work and Innovation: Evidence from Doing Business in China (May 30, 2017). Available at SSRN: https://ssrn.com/abstract=2613248 or http://dx.doi.org/10.2139/ssrn.2613248

Jan Bena

University of British Columbia - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
+1 604 822 8490 (Phone)

HOME PAGE: http://www.janbena.com

Elena Simintzi (Contact Author)

University of British Columbia ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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