The effect of import competition on firm productivity and innovation: does the distance to technology frontier matter?

Ding, S. , Sun, P. and Jiang, W. (2016) The effect of import competition on firm productivity and innovation: does the distance to technology frontier matter? Oxford Bulletin of Economics and Statistics, 78(2), pp. 197-227. (doi:10.1111/obes.12110)

[img]
Preview
Text
107295.pdf - Accepted Version

1MB

Abstract

How does foreign competition affect growth and innovation in China? Using our unique measures of proximity of Chinese firms and industries to the world technology frontier, we find that despite vast sectoral heterogeneity, Chinese manufacturing industries have undergone rapid technological upgrading over the period of 2000–06. The distance to the world production frontier of firms and industries plays an important role in shaping the nexus between the competition pressure from foreign imports and domestic firms' growth and innovation behaviour. Our results support the theoretical predictions of Aghion et al. (2005, The Quarterly Journal of Economics, pp. 701–728) that import competition stimulates the domestic firms' productivity growth and R&D expenditure if firms and their industries are close to the world frontier, but discourages such incentives for laggard firms and industries. The two forces highlighted by the model operate for imports under the ordinary-trade regime, for collective and private firms, and for imports originated from high-income countries. Our findings are robust after controlling the influence of foreign investment, the reverse causality of regressors and the short-term business cycle fluctuations.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Ding, Dr Sai
Authors: Ding, S., Sun, P., and Jiang, W.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Oxford Bulletin of Economics and Statistics
Publisher:Wiley
ISSN:0305-9049
ISSN (Online):1468-0084
Copyright Holders:Copyright © 2015 Wiley
First Published:First published in Oxford Bulletin of Economics and Statistics 78(2):197-227
Publisher Policy:Reproduced in accordance with the copyright policy of the publisher.

University Staff: Request a correction | Enlighten Editors: Update this record