Imitation, Innovation, and Technological Complexity: Foreign Knowledge Spillovers in China

33 Pages Posted: 18 Mar 2021 Last revised: 29 Apr 2021

See all articles by Salomé Baslandze

Salomé Baslandze

Federal Reserve Bank of Atlanta

Pengfei Han

Peking University, Guanghua School of Management

Felipe Saffie

University of Virginia - Darden School of Business

Date Written: March 2, 2021

Abstract

In the last two decades, the world has witnessed the rise of Chinese innovation. China, once a manufacturing hub for the West, has become a major player in the development of many new technologies. We assess how foreign knowledge spillovers spurred this transformation. To this end, we assemble a rich micro-level data set of firm patenting and accounting information. The aggregate data show that over time Chinese firms have gained leadership over foreign firms in China both in terms of production and patenting. Nevertheless, the aggregate trends mask rich industry heterogeneity pointing to the limits of cross-firm knowledge spillovers. While foreign firms have lost market leadership in low-tech (simple) industries, they have maintained strong leadership in high-tech (complex) industries. Exploring foreign knowledge spillovers using patent citations data, we show that only firms in low-tech (simple) industries eventually decrease their reliance on foreign knowledge for innovation. Our findings suggest that imitation is a path to indigenous innovation only in low-tech (simple) industries and point to the need of industry-specific policies.

Keywords: Knowledge spillover, imitation, innovation, R&D, patents, multinational firms

JEL Classification: F60, F23, O30

Suggested Citation

Baslandze, Salome and Han, Pengfei and Saffie, Felipe, Imitation, Innovation, and Technological Complexity: Foreign Knowledge Spillovers in China (March 2, 2021). Darden Business School Working Paper No. 3806435, 2021, Available at SSRN: https://ssrn.com/abstract=3806435 or http://dx.doi.org/10.2139/ssrn.3806435

Salome Baslandze

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
30309 (Fax)

HOME PAGE: http://https://sites.google.com/site/sabaslandze/home

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

Felipe Saffie

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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