Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China?

47 Pages Posted: 22 Jun 2015

See all articles by Johan Hombert

Johan Hombert

HEC Paris - Finance Department

Adrien Matray

Princeton University

Multiple version iconThere are 2 versions of this paper

Date Written: June 2015

Abstract

We study whether R&D-intensive firms are more resilient to trade shocks. We correct for the endogeneity of R&D using tax-induced changes to the cost of R&D. On average across US manufacturing firms, rising imports from China lead to slower sales growth and lower profitability. These effects are, however, significantly smaller for firms with a larger stock of R&D -- by about half when moving from the 25th percentile to the 75th percentile of the R&D stock distribution. As a result, while the average firm in import-competing industries cuts capital expenditures and employment, R&D-intensive firms downsize considerably less.

Keywords: China, import competition, innovation, R&D tax credit

JEL Classification: F14, L25, L60, O33

Suggested Citation

Hombert, Johan and Matray, Adrien, Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China? (June 2015). CEPR Discussion Paper No. DP10666, Available at SSRN: https://ssrn.com/abstract=2621570

Johan Hombert (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Adrien Matray

Princeton University ( email )

Bendheim Center for Finance
26 Prospect Avenue
Princeton, NJ 08540
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
353
PlumX Metrics