Intermediate Input Imports and Innovations: Evidence from Chinese Firms’ Patent Filings

Posted: 18 May 2021

See all articles by Qing Liu

Qing Liu

Renmin University of China

Larry D. Qiu

The University of Hong Kong - Faculty of Business and Economics; Hong Kong University of Science & Technology (HKUST) - Department of Economics

Date Written: 2016

Abstract

Innovation plays a key role in economic growth. In this paper, we investigate the effects of intermediate input tariff reduction on the innovation activities of domestic firms. Input tariff reduction has two opposite effects on the innovation decision of a firm: it may promote innovation because the cost of innovation activities decreases, but it may also result in a decrease in innovation because foreign technologies become cheaper. We use Chinese firm-level data from 1998 to 2007, which features a drastic input tariff cut in 2002 because of China's WTO accession, and find that input tariff cut results in less innovation undertaken by Chinese firms. The findings are obtained using the difference-in-differences technique and are robust to various specifications checks of the model. We also provide a theoretical framework to generate insights to the empirical findings.

Keywords: Trade Liberalization, Intermediate Input, Innovation, Patent

JEL Classification: F13, F15, O14, O31

Suggested Citation

Liu, Qing and Qiu, Larry Dongxiao and Qiu, Larry Dongxiao, Intermediate Input Imports and Innovations: Evidence from Chinese Firms’ Patent Filings (2016). Journal of International Economics, Vol. 103, 2016, Available at SSRN: https://ssrn.com/abstract=3846064

Qing Liu (Contact Author)

Renmin University of China ( email )

Larry Dongxiao Qiu

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Hong Kong University of Science & Technology (HKUST) - Department of Economics ( email )

School of Economics and Finance
University of Hong Kong
Pokfulam
Hong Kong

HOME PAGE: http://www.bm.ust.hk/~larryqiu/

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