IDEAS home Printed from https://ideas.repec.org/a/spr/laecrv/v28y2019i1d10.1186_s40503-019-0067-3.html
   My bibliography  Save this article

The impact of competition with China in the US market on innovation in Mexican manufacturing firms

Author

Listed:
  • Liliana Meza-González

    (INEGI and Universidad Iberoamericana)

  • Jaime Marie Sepulveda

    (Texas A&M University)

Abstract

Using data from 6378 Mexican firms for the 2012–2013 period, this paper estimates the effect of competition with China for the US market on the innovation efforts of the Mexican manufacturing sector. After controlling for the influence of several variables, we find a U-curve shaped relationship between foreign competition (measured by the China effect) and the innovation of Mexican manufacturing firms in products, in processes, and for the world. Given that the quadratic positive effect is much larger than the negative linear effect, we conclude that an Escape-Competition effect dominates when Mexican firms are fighting for a larger market share with China in the US.

Suggested Citation

  • Liliana Meza-González & Jaime Marie Sepulveda, 2019. "The impact of competition with China in the US market on innovation in Mexican manufacturing firms," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-21, December.
    • Handle: RePEc:spr:laecrv:v:28:y:2019:i:1:d:10.1186_s40503-019-0067-3
    DOI: 10.1186/s40503-019-0067-3
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1186/s40503-019-0067-3
    File Function: Abstract
    Download Restriction: no
    File URL: https://libkey.io/10.1186/s40503-019-0067-3?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
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Carlin Wendy & Schaffer Mark & Seabright Paul, 2004. "A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-45, September.
    4. Yuriy Gorodnichenko & Jan Svejnar & Katherine Terrell, 2010. "Globalization and Innovation in Emerging Markets," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 194-226, April.
    5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    6. Aamir Rafique Hashmi, 2013. "Competition and Innovation: The Inverted-U Relationship Revisited," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1653-1668, December.
    7. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    8. Martin Neil Baily & Hans Gersbach, 1995. "Efficiency in Manufacturing and the Need for Global Competition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995 Micr), pages 307-358.
    9. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-526, June.
    10. Steven Salop, 1977. "The Noisy Monopolist: Imperfect Information, Price Dispersion and Price Discrimination," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 393-406.
    11. Jorge Eduardo Mendoza Cota, 2016. "US manufacturing imports from China and employment in the Mexican manufacturing sector," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 35(69), pages 583-613, April.
    12. Sargent, John & Matthews, Linda, 2009. "China versus Mexico in the Global EPZ Industry: Maquiladoras, FDI Quality, and Plant Mortality," World Development, Elsevier, vol. 37(6), pages 1069-1082, June.
    13. Caamal-Olvera, Cinthya G. & Rangel-González, Erick, 2015. "Measuring the impact of the Chinese competition on the Mexican Labor Market: 1990–2013," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 351-363.
    14. Roberto Alvarez & Raymond Robertson, 2004. "Exposure to foreign markets and plant-level innovation: evidence from Chile and Mexico," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 13(1), pages 57-87.
    15. Zhiqi Chen, 2017. "Product Market Competition and Innovation: What Can We Learn from Economic Theory?," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 12(3), pages 450-464, September.
    16. Kamien, Morton I & Schwartz, Nancy L, 1972. "Timing of Innovations Under Rivalry," Econometrica, Econometric Society, vol. 40(1), pages 43-60, January.
    17. Richard Blundell & Rachel Griffith & John van Reenen, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(3), pages 529-554.
    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. Hisham Alidrisi, 2021. "The Development of an Efficiency-Based Global Green Manufacturing Innovation Index: An Input-Oriented DEA Approach," Sustainability, MDPI, vol. 13(22), pages 1-11, November.
    2. Rut Atayde & Rafael Garduño & Eduardo Robles & Pluvia Zúñiga, 2021. "Market competition and firm productivity and innovation: Responses in Mexican manufacturing industries," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(4), pages 1185-1214, August.

    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. Yuriy Gorodnichenko & Jan Svejnar & Katherine Terrell, 2010. "Globalization and Innovation in Emerging Markets," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 194-226, April.
    2. Michael L. Polemis, 2020. "A note on the estimation of competition-productivity nexus: a panel quantile approach," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 47(4), pages 663-676, December.
    3. Benavente, Jose Miguel & Zuniga, Pluvia, 2021. "How does market competition affect firm innovation incentives in emerging countries? Evidence from Latin American firms," MERIT Working Papers 2021-024, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    4. Aurelien Quignon, 2022. "Market Regulation and Innovation: Direct and Indirect Effects," Journal of Industry, Competition and Trade, Springer, vol. 22(3), pages 429-456, December.
    5. Bessonova, Evguenia & Gonchar, Ksenia, 2019. "How the innovation-competition link is shaped by technology distance in a high-barrier catch-up economy," Technovation, Elsevier, vol. 86, pages 15-32.
    6. Benavente, José Miguel & Zuñiga, Pluvia, 2022. "How Does Market Competition Affect Firm Innovation Incentives in Emerging Countries? Evidence from Chile and Colombia," IDB Publications (Working Papers) 12198, Inter-American Development Bank.
    7. Anetta Čaplánová & Rudolf Sivák & John Hudson, 2012. "Vplyv priamych zahraničných investícií na inovačnú činnosť firiem [The Impact of Foreign Direct Investment on Firms´ Innovation Activities]," Politická ekonomie, Prague University of Economics and Business, vol. 2012(6), pages 764-779.
    8. Cornett, Marcia Millon & Erhemjamts, Otgontsetseg & Tehranian, Hassan, 2019. "Competitive environment and innovation intensity," Global Finance Journal, Elsevier, vol. 41(C), pages 44-59.
    9. 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.
    10. Le, Danh Vinh & Le, Huong Thi Thu & Vo, Lai Van, 2021. "The bright side of product market threats: The case of innovation," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 161-176.
    11. Michael L. Polemis & Markos Tselekounis, 2022. "Upstream regulation and non-separable innovation," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(2), pages 301-312, June.
    12. Tianjiao Xia & Xiaohui Liu, 2017. "Foreign competition, domestic competition and innovation in Chinese private high-tech new ventures," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(6), pages 716-739, August.
    13. Rut Atayde & Rafael Garduño & Eduardo Robles & Pluvia Zúñiga, 2021. "Market competition and firm productivity and innovation: Responses in Mexican manufacturing industries," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(4), pages 1185-1214, August.
    14. Xavier Vives, 2008. "Innovation And Competitive Pressure," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    15. Daria Onori, 2015. "Competition and Growth: Reinterpreting their Relationship," Manchester School, University of Manchester, vol. 83(4), pages 398-422, July.
    16. Jerbashian, Vahagn, 2015. "The telecommunications industry and economic growth: How the market structure matters," Economic Modelling, Elsevier, vol. 51(C), pages 515-523.
    17. Ramiro de Elejalde & Carlos Ponce & Flavia Roldán, 2018. "Innovation and competition: evidence from Uruguayan firms," Documentos de Investigación 116, Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales.
    18. Charles Bérubé & Marc Duhamel & Daniel Ershov, 2012. "Market Incentives for Business Innovation: Results from Canada," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 47-65, March.
    19. MARSCHINSKI Robert & DE AMORES HERNANDEZ Antonio & AMOROSO Sara & BAUER Peter & CARDANI Roberta & CSEFALVAY Zoltan & GENTY Aurelien & GKOTSIS Petros & GREGORI Wildmer & GRASSANO Nicola & HERNANDEZ GUE, 2021. "EU competitiveness: recent trends, drivers, and links to economic policy: A Synthesis Report," JRC Research Reports JRC123232, Joint Research Centre.
    20. Muhammad Zeeshan Younas & Muhammad Iftikhar Husnain, 2022. "Role of market structure in firm-level innovation: an extended CDM model for a developing economy," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 49(1), pages 91-104, March.

    More about this item

    Keywords

    Foreign competition; Technological innovation; Manufacturing sector; Developing country;
    All these keywords.

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • F6 - International Economics - - Economic Impacts of Globalization

    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:spr:laecrv:v:28:y:2019:i:1:d:10.1186_s40503-019-0067-3. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.