Mapping US-China Technology Decoupling, Innovation, and Firm Performance

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See all articles by Pengfei Han

Pengfei Han

Peking University, Guanghua School of Management

Wei Jiang

Columbia Business School - Finance and Economics; ECGI; NBER

Danqing Mei

Cheung Kong Graduate School of Business

Date Written: December 2, 2020

Abstract

Based on the combined patent data from the U.S. and China, we quantify the technology decoupling and dependence between the two countries. The first two decades of the 21st century witnessed a continuing increase in technology integration (or less decoupling), but China’s technology dependence on the U.S. increases (decreases) during the first (second) decade. A panel VAR analysis suggests that a higher level of decoupling in a given technology field predicts more dependence of China on the U.S., which in turn predicts less decoupling. Decoupling is associated with more patent outputs in the given sector in both countries, lower firm productivity and valuation in China, but no significant impact on U.S. firms. Finally, China’s innovation-oriented industrial policies are associated with both more integration with and less dependence on U.S. technology down the road, trading off the inherent conflict between the two main policy objectives of promoting indigenous innovation versus enhancing firm competitiveness.

Keywords: Technology Decoupling, International Economic Order and Integration, Innovation, R&D, Patent, Industrial Policy

JEL Classification: O31, O33, F02, O25

Suggested Citation

Han, Pengfei and Jiang, Wei and Mei, Danqing, Mapping US-China Technology Decoupling, Innovation, and Firm Performance (December 2, 2020). Available at SSRN: https://ssrn.com/abstract=3779452

Pengfei Han (Contact Author)

Peking University, Guanghua School of Management ( email )

No 5 Yiheyuan Road, Haidian District
Beijing 100871
China

HOME PAGE: http://https://sites.google.com/view/pengfeihan/home

Wei Jiang

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States
(212) 854-5553 (Phone)

ECGI ( email )

c/o the Royal Academies of Belgium
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NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Danqing Mei

Cheung Kong Graduate School of Business ( email )

1017, Oriental Plaza 1
No.1 Dong Chang'an Street
Beijing
China

HOME PAGE: http://danqingmei.com

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