Import Competition and Firm Innovation: Evidence from China

This paper investigates whether and how import competition affects firm innovation. Using China’s World Trade Organization (WTO) accession as a quasi-natural experiment, we find that import competition reduces firm innovation, which is consistent with the Schumpeterian effect. We also find heterogeneous treatment effects across firm productivity and patent types in a way consistent with preference and knowledge spillover effects, but not with escape-competition and trapped-factor effects.

Keywords: Import competition, Firm innovation, Schumpeterian effect, Spillover effect, Preference effect, Escape-competition effect, Trapped-factor effect

JEL Classification: F12, F13, F14, F15, L11, L13, O31

Suggested Citation: Suggested Citation

Liu, Qing and Lu, Ruosi and Lu, Yi and Luong, Tuan Anh, Import Competition and Firm Innovation: Evidence from China (March 22, 2021). Journal of Development Economics, Vol. 151, 2021, Available at SSRN: https://ssrn.com/abstract=3810022