IDEAS home Printed from https://ideas.repec.org/a/bla/worlde/v43y2020i1p60-80.html
   My bibliography  Save this article

Innovation responses of Japanese firms to Chinese import competition

Author

Listed:
  • Nobuaki Yamashita
  • Isamu Yamauchi

Abstract

This paper examines innovation responses of a panel of Japanese firms to the intensified import competition from China in the period 1995–2005. We build a comprehensive firm‐level dataset linking patents and R&D merged to cross‐industry measures of Chinese import competition. Accounting for a simultaneity bias between innovation and importing and the possible heterogeneous effects across firms, we found that patenting has increased in response to an influx of Chinese imports, but it has adversely affected the quality of innovation, measured by forward citations received. These effects are only observed for globally engaged firms, not for firms focusing on the domestic market.

Suggested Citation

  • Nobuaki Yamashita & Isamu Yamauchi, 2020. "Innovation responses of Japanese firms to Chinese import competition," The World Economy, Wiley Blackwell, vol. 43(1), pages 60-80, January.
    • Handle: RePEc:bla:worlde:v:43:y:2020:i:1:p:60-80
    DOI: 10.1111/twec.12843
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/twec.12843
    Download Restriction: no
    File URL: https://libkey.io/10.1111/twec.12843?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    2. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    3. Iacovone, Leonardo & Javorcik, Beata S., 2008. "Multi-product exporters : diversification and micro-level dynamics," Policy Research Working Paper Series 4723, The World Bank.
    4. Mary Amiti & Amit K. Khandelwal, 2013. "Import Competition and Quality Upgrading," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 476-490, May.
    5. Nagaoka, Sadao & Motohashi, Kazuyuki & Goto, Akira, 2010. "Patent Statistics as an Innovation Indicator," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1083-1127, Elsevier.
    6. Amit Khandelwal, 2010. "The Long and Short (of) Quality Ladders," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(4), pages 1450-1476.
    7. Athukorala, Prema-chandra & Yamashita, Nobuaki, 2006. "Production fragmentation and trade integration: East Asia in a global context," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 233-256, December.
    8. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact of Outsourcing and High-Technology Capital on Wages: Estimates For the United States, 1979–1990," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 907-940.
    9. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    10. David Autor & David Dorn & Gordon H. Hanson & Gary Pisano & Pian Shu, 2020. "Foreign Competition and Domestic Innovation: Evidence from US Patents," American Economic Review: Insights, American Economic Association, vol. 2(3), pages 357-374, September.
    11. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343, National Bureau of Economic Research, Inc.
    12. Manuel Trajtenberg, 1990. "A Penny for Your Quotes: Patent Citations and the Value of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 172-187, Spring.
    13. Criscuolo, Chiara & Haskel, Jonathan E. & Slaughter, Matthew J., 2010. "Global engagement and the innovation activities of firms," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 191-202, March.
    14. Peter K. Schott, 2006. "The Relative Sophistication of Chinese Exports," NBER Working Papers 12173, National Bureau of Economic Research, Inc.
    15. Ariel Pakes & Zvi Griliches, 1980. "Patents and R and D at the Firm Level: A First Look," NBER Working Papers 0561, National Bureau of Economic Research, Inc.
    16. Nicholas Bloom & Paul M. Romer & Stephen J. Terry & John Van Reenen, 2013. "A Trapped-Factors Model of Innovation," American Economic Review, American Economic Association, vol. 103(3), pages 208-213, May.
    17. Peter K. Schott, 2008. "The relative sophistication of Chinese exports [‘Manufacturing Earnings and Compensation in China’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 23(53), pages 6-49.
    18. Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2005. "Market Value and Patent Citations," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 16-38, Spring.
    19. Avraham Ebenstein & Ann Harrison & Margaret McMillan & Shannon Phillips, 2022. "Estimating The Impact Of Trade And Offshoring On American Workers Using The Current Population Surveys," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 12, pages 275-289, World Scientific Publishing Co. Pte. Ltd..
    20. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Survival of the best fit: Exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants," Journal of International Economics, Elsevier, vol. 68(1), pages 219-237, January.
    21. Mathias Thoenig & Thierry Verdier, 2003. "A Theory of Defensive Skill-Biased Innovation and Globalization," American Economic Review, American Economic Association, vol. 93(3), pages 709-728, June.
    22. Paula Bustos, 2011. "Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms," American Economic Review, American Economic Association, vol. 101(1), pages 304-340, February.
    23. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 31-66.
    24. Yamauchi, Isamu & Nagaoka, Sadao, 2015. "An economic analysis of deferred examination system: Evidence from a policy reform in Japan," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 19-28.
    25. Dang, Jianwei & Motohashi, Kazuyuki, 2015. "Patent statistics: A good indicator for innovation in China? Patent subsidy program impacts on patent quality," China Economic Review, Elsevier, vol. 35(C), pages 137-155.
    26. Branstetter, Lee, 2006. "Is foreign direct investment a channel of knowledge spillovers? Evidence from Japan's FDI in the United States," Journal of International Economics, Elsevier, vol. 68(2), pages 325-344, March.
    27. Justin R. Pierce & Peter K. Schott, 2016. "The Surprisingly Swift Decline of US Manufacturing Employment," American Economic Review, American Economic Association, vol. 106(7), pages 1632-1662, July.
    28. Pakes, Ariel & Griliches, Zvi, 1980. "Patents and R&D at the firm level: A first report," Economics Letters, Elsevier, vol. 5(4), pages 377-381.
    29. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1169-1213.
    30. Goto, Akira & Motohashi, Kazuyuki, 2007. "Construction of a Japanese Patent Database and a first look at Japanese patenting activities," Research Policy, Elsevier, vol. 36(9), pages 1431-1442, November.
    31. Nobuaki Yamashita, 2010. "International Fragmentation of Production," Books, Edward Elgar Publishing, number 13615.
    32. Utar, Hale & Ruiz, Luis B. Torres, 2013. "International competition and industrial evolution: Evidence from the impact of Chinese competition on Mexican maquiladoras," Journal of Development Economics, Elsevier, vol. 105(C), pages 267-287.
    33. Prema‐chandra Athukorala & Nobuaki Yamashita, 2009. "Global Production Sharing and Sino–US Trade Relations," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(3), pages 39-56, May.
    34. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    35. Amore, Mario Daniele, 2015. "Companies learning to innovate in recessions," Research Policy, Elsevier, vol. 44(8), pages 1574-1583.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gu, Grace & Malik, Samreen & Pozzoli, Dario & Rocha, Vera, 2021. "Worker Reallocation, Firm Innovation, and Chinese Import Competition," Working Papers 9-2021, Copenhagen Business School, Department of Economics.
    2. Masami Imai & Michiru Sawada, 2022. "Does a Financial Crisis Impair Corporate Innovation?," Wesleyan Economics Working Papers 2022-002, Wesleyan University, Department of Economics.
    3. Akira Sasahara, 2022. "The Empirics of the China Trade Shock: A Summary of Estimation Methods and A Literature Review," Keio-IES Discussion Paper Series 2022-008, Institute for Economics Studies, Keio University.
    4. Ito, Keiko & Ikeuchi, Kenta & Criscuolo, Chiara & Timmis, Jonathan & Bergeaud, Antonin, 2023. "Global value chains and domestic innovation," Research Policy, Elsevier, vol. 52(3).
    5. Mauro Caselli & Stefano Schiavo, 2020. "Markups, import competition and exporting," The World Economy, Wiley Blackwell, vol. 43(5), pages 1309-1326, May.
    6. Shuhei Kainuma & Yukiko U. Saito, 2022. "China's impact on regional employment: Propagation through input–output linkages and co‐location patterns," The World Economy, Wiley Blackwell, vol. 45(11), pages 3559-3601, November.
    7. HASHIMOTO Yuki, 2020. "Global Competition, Worker Retention, and Immigrant Employment in Manufacturing SMEs," Discussion papers 20071, Research Institute of Economy, Trade and Industry (RIETI).
    8. Klaus S. Friesenbichler & Andreas Reinstaller, 2021. "Do Firms Facing Competitors from Emerging Markets Behave Differently? Evidence from Austrian Manufacturing Firms," WIFO Working Papers 625, WIFO.
    9. HAYAKAWA Kazunobu & ITO Tadashi & URATA Shujiro, 2022. "Impacts of Increased Chinese Imports on Japan’s Labor Market: Firm and Regional Aspects," Discussion papers 22037, Research Institute of Economy, Trade and Industry (RIETI).
    10. SAITO Yukiko & KAINUMA Shuhei & Michal FABINGER, 2020. "China's Impact on Regional Employment: Propagation through Supply Chains and Co-agglomeration Pattern," Discussion papers 20054, Research Institute of Economy, Trade and Industry (RIETI).
    11. Klaus S. Friesenbichler & Agnes Kügler & Andreas Reinstaller, 2021. "The Impact of Import Competition from China on Firm-level Productivity Growth in the EU," WIFO Working Papers 623, WIFO.
    12. S, Minkyu., 2021. "The impact of trade on R&D: Evidence from UK firms," Cambridge Working Papers in Economics 2151, Faculty of Economics, University of Cambridge.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. YAMASHITA Nobuaki & YAMAUCHI Isamu, 2019. "Effects of Offshore Production and R&D on Domestic Innovation Activities," Discussion papers 19068, Research Institute of Economy, Trade and Industry (RIETI).
    2. Muendler, Marc-Andreas, 2017. "Trade, technology, and prosperity: An account of evidence from a labor-market perspective," WTO Staff Working Papers ERSD-2017-15, World Trade Organization (WTO), Economic Research and Statistics Division.
    3. Yamashita, Nobuaki & Yamauchi, Isamu, 2019. "The Rise of the People’s Republic of China and its Competition Effects on Innovation in Japan," ADBI Working Papers 939, Asian Development Bank Institute.
    4. Yamashita, Nobuaki & Yamauchi, Isamu, 2019. "The effects of offshore production on onshore innovation: Evidence from Japanese multinationals," Research Policy, Elsevier, vol. 48(9), pages 1-1.
    5. David Autor & David Dorn & Gordon H. Hanson & Gary Pisano & Pian Shu, 2020. "Foreign Competition and Domestic Innovation: Evidence from US Patents," American Economic Review: Insights, American Economic Association, vol. 2(3), pages 357-374, September.
    6. Nobuaki Yamashita & Isamu Yamauchi, 2019. "The Rise of the People’s Republic of China and its Competition Effects on Innovation in Japan," Working Papers id:13030, eSocialSciences.
    7. Nicholas Bloom & Mirko Draca & John Van Reenen, 2016. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(1), pages 87-117.
    8. Christian Darko & Giovanni Occhiali & Enrico Vanino, 2021. "The Chinese are Here: Import Penetration and Firm Productivity in Sub-Saharan Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 57(12), pages 2112-2135, December.
    9. McManus, T. Clay & Schaur, Georg, 2016. "The effects of import competition on worker health," Journal of International Economics, Elsevier, vol. 102(C), pages 160-172.
    10. Andrés César & Guillermo Falcone, 2020. "Heterogeneous Effects of Chinese Import Competition on Chilean Manufacturing Plants," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 1-60, December.
    11. Ujjayant Chakravorty & Runjuan Liu & Ruotao Tang, 2017. "Firm Innovation under Import Competition from Low-Wage Countries," CESifo Working Paper Series 6569, CESifo.
    12. Li, Xiaogang, 2020. "Innovation, market valuations, policy uncertainty and trade: Theory and evidence," ISU General Staff Papers 202001010800009179, Iowa State University, Department of Economics.
    13. Nicholas Bloom & Paul Romer & Stephen J Terry & John Van Reenen, 2021. "Trapped Factors and China’s Impact on Global Growth [Competition and innovation: an inverted-U relationship]," The Economic Journal, Royal Economic Society, vol. 131(633), pages 156-191.
    14. Richard Bräuer & Matthias Mertens & Viktor Slavtchev, 2023. "Import competition and firm productivity: Evidence from German manufacturing," The World Economy, Wiley Blackwell, vol. 46(8), pages 2285-2305, August.
    15. Pierce, Justin R. & Schott, Peter K., 2018. "Investment responses to trade liberalization: Evidence from U.S. industries and establishments," Journal of International Economics, Elsevier, vol. 115(C), pages 203-222.
    16. Goel, Manisha, 2017. "Offshoring – Effects on technology and implications for the labor market," European Economic Review, Elsevier, vol. 98(C), pages 217-239.
    17. Teresa C. Fort & Justin R. Pierce & Peter K. Schott, 2018. "New Perspectives on the Decline of US Manufacturing Employment," Journal of Economic Perspectives, American Economic Association, vol. 32(2), pages 47-72, Spring.
    18. Ana Maria Santacreu & Liliana Varela, 2018. "Innovation and the Patterns of Trade: A Firm-Level Analysis," 2018 Meeting Papers 303, Society for Economic Dynamics.
    19. David H. Autor & David Dorn & Gordon H. Hanson, 2016. "The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 205-240, October.
    20. Kirill Borusyak & Xavier Jaravel, 2018. "The Distributional Effects of Trade: Theory and Evidence from the United States," 2018 Meeting Papers 284, Society for Economic Dynamics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:worlde:v:43:y:2020:i:1:p:60-80. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.