U.S. Innovation and Chinese Competition for Innovation Production
65 Pages Posted: 9 Dec 2018 Last revised: 21 Jul 2020
Date Written: March 15, 2019
We examine how competitive shocks from China impact U.S. innovation through two distinct margins: the markets for innovation and existing products. We identify shocks to both margins using the geography of Chinese internet penetration and Chinese import data. Increases in the ability of Chinese industry peers to gather knowledge through the internet are followed by sharp reductions in U.S. R\&D investment and subsequent patents, and increased patenting by Chinese firms. The new Chinese patents also cite the patents of U.S. firms at a high rate, consistent with increased intellectual property competition. Overall, Chinese competition in intellectual property and in existing products are associated with decreased U.S. firm innovation.
Keywords: Innovation, competition, China, investment, internet penetration
JEL Classification: O31, O34, D43, F13
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