U.S. Innovation and Chinese Competition for Innovation Production

54 Pages Posted: 9 Dec 2018 Last revised: 13 Mar 2019

See all articles by Gerard Hoberg

Gerard Hoberg

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Bruce Yuan Li

University of Southern California, Marshall School of Business

Gordon M. Phillips

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Date Written: March 12, 2019

Abstract

We examine how competitive shocks from China impact U.S. innovation through two margins: the markets for innovation and for existing products. Using Chinese data, we map each industry to province Internet penetration levels using geographic agglomeration data. The resulting industry-year database indicates the ability of Chinese firms to acquire knowledge globally and compete in the market for intellectual property production. Increases in provincial Chinese Internet penetration are followed by sharp reductions in R&D investment and subsequent patents for U.S. firms, and increased patenting by Chinese firms. The new Chinese patents also cite the patents of treated U.S. firms at a high rate, consistent with increased intellectual property competition. In contrast, U.S. firms with fewer growth options and more tangible assets tend to increase R&D and patenting activity. Overall, both competition in intellectual property by Chinese firms and the asset competition of U.S. firms influence U.S. firm innovation.

Keywords: Innovation, competition, China, investment, internet penetration

JEL Classification: O31, O34, D43, F13

Suggested Citation

Hoberg, Gerard and Li, Bruce Yuan and Phillips, Gordon M., U.S. Innovation and Chinese Competition for Innovation Production (March 12, 2019). Tuck School of Business Working Paper No. 3294389. Available at SSRN: https://ssrn.com/abstract=3294389 or http://dx.doi.org/10.2139/ssrn.3294389

Gerard Hoberg (Contact Author)

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~hoberg/

Bruce Yuan Li

University of Southern California, Marshall School of Business ( email )

Los Angeles, CA
United States

Gordon M. Phillips

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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