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Foreign Competition and Domestic Innovation: Evidence from US Patents

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  • David Autor
  • David Dorn
  • Gordon H. Hanson
  • Gary Pisano
  • Pian Shu

Abstract

Manufacturing accounts for more than three-quarters of US corporate patents. The competitive shock to this sector emanating from China's economic ascent could in theory either augment or stifle US innovation. Using three decades of US patents matched to corporate owners, we quantify how foreign competition affects domestic innovation. Rising import exposure intensifies competitive pressure, reducing sales, profitability, and R&D expenditure at US firms. Accounting for confounding sectoral patenting trends, we find that US patent production declines in sectors facing greater import competition. This adverse effect is larger among initially less profitable and less capital-intensive firms.

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  • 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.
    • Handle: RePEc:aea:aerins:v:2:y:2020:i:3:p:357-74
    DOI: 10.1257/aeri.20180481
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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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