Foreign Competition and Domestic Innovation: Evidence from U.S. Patents

21 Pages Posted: 14 Oct 2019

See all articles by David H. Autor

David H. Autor

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

David Dorn

University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute)

Gordon H. Hanson

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS); National Bureau of Economic Research (NBER)

Gary P. Pisano

Harvard Business School

Pian Shu

Scheller College of Business, Georgia Tech

Multiple version iconThere are 4 versions of this paper

Date Written: 2019

Abstract

Manufacturing accounts for more than three-quarters of U.S. corporate patents. The competitive shock to this sector emanating from China's economic ascent could in theory either augment or stifle U.S. innovation. Using three decades of U.S. patents matched to corporate owners, we quantify how foreign competition affects domestic innovation. Rising import exposure intensifies competitive pressure, reducing sales, profitability, and R&D expenditure at U.S. firms. Accounting for confounding sectoral patenting trends, we find that U.S. patent production declines in sectors facing greater import competition. This adverse effect is larger among initially less profitable and less capital-intensive firms.

Keywords: innovation, patents, trade

JEL Classification: F100, O310

Suggested Citation

Autor, David H. and Dorn, David and Hanson, Gordon H. and Pisano, Gary and Shu, Pian, Foreign Competition and Domestic Innovation: Evidence from U.S. Patents (2019). CESifo Working Paper No. 7865, Available at SSRN: https://ssrn.com/abstract=3468000

David H. Autor (Contact Author)

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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David Dorn

University of Zurich - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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IZA Institute of Labor Economics

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Gordon H. Hanson

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Gary Pisano

Harvard Business School ( email )

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Pian Shu

Scheller College of Business, Georgia Tech ( email )

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