The Impact of Emerging Market Competition on Innovation and Business Strategy

35 Pages Posted: 21 Nov 2016

See all articles by Lorenz Kueng

Lorenz Kueng

University of Lugano - Faculty of Economics; Swiss Finance Institute; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Northwestern University - Kellogg School of Management

Nicholas Li

University of Toronto - Department of Economics

Mu-Jeung Yang

University of Washington - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 2016

Abstract

How do firms in high-income countries adjust to emerging market competition? We estimate how a representative panel of Canadian firms adjusts innovation activities, business strategies, and exit in response to large increases in Chinese imports between 1999 and 2005. On average, process innovation declines more strongly than product innovation. In addition, initially more differentiated firms that survive the increase in competition have better performance ex-post, but are ex-ante more likely to exit. Differentiation therefore does not ensure insulation against competitive shocks but instead increases risk.

Suggested Citation

Kueng, Lorenz and Li, Nicholas and Yang, Mu-Jeung, The Impact of Emerging Market Competition on Innovation and Business Strategy (November 2016). NBER Working Paper No. w22840. Available at SSRN: https://ssrn.com/abstract=2873313

Lorenz Kueng (Contact Author)

University of Lugano - Faculty of Economics

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Swiss Finance Institute

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Nicholas Li

University of Toronto - Department of Economics ( email )

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Canada

Mu-Jeung Yang

University of Washington - Department of Economics ( email )

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