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Quid Pro Quo, Knowledge Spillovers, and Industrial Quality Upgrading: Evidence from the Chinese Auto Industry

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Listed:
  • Jie Bai
  • Panle Jia Barwick
  • Shengmao Cao
  • Shanjun Li

Abstract

This paper studies the impact of quid pro quo (technology for market access) in facilitating knowledge spillovers and quality upgrading in the Chinese automobile industry. The identification strategy exploits within-product quality variation across a rich set of quality dimensions. We find affiliated domestic automakers adopt more similar quality strengths of their joint venture partners, consistent with knowledge spillovers. Additional analysis suggests worker flows and supplier networks mediate knowledge spillovers. Knowledge spillovers due to ownership affiliation under quid pro quo contributed 8.3 percent of the quality improvement experienced by affiliated domestic models from 2001 to 2014, relative to nonaffiliated domestic models.

Suggested Citation

  • Jie Bai & Panle Jia Barwick & Shengmao Cao & Shanjun Li, 2025. "Quid Pro Quo, Knowledge Spillovers, and Industrial Quality Upgrading: Evidence from the Chinese Auto Industry," American Economic Review, American Economic Association, vol. 115(11), pages 3825-3852, November.
    • Handle: RePEc:aea:aecrev:v:115:y:2025:i:11:p:3825-52
    DOI: 10.1257/aer.20221501
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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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