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International Trade and R&D Investment: Evidence from Chinese Manufacturing Firms

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  • Yixiao Zhou
  • Ligang Song

Abstract

A current concern for China's long-term growth prospect is whether China can become an innovative economy and achieve industrial upgrading to compensate for the gradually declining competitiveness resulting from low-cost labor. The present study examines this issue by exploring how trade participation impacts on the R&D investment of manufacturing firms through various channels. Merging China's Annual Manufacturing Survey Dataset and the Chinese Customs Dataset allows us to study such a relationship at the individual firm level. The empirical results suggest that channels such as geographical diversification of export markets, share of imports from high-income countries, average unit value of imports, number of intermediate goods and capital goods imports, and the trade regime are significant factors that influence firm-level R&D investment. The study discusses the policy implications of the empirical findings in relation to industrial and trade policies that may be potentially beneficial for China's transition towards an innovative economy.

Suggested Citation

  • Yixiao Zhou & Ligang Song, 2016. "International Trade and R&D Investment: Evidence from Chinese Manufacturing Firms," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(1), pages 63-84, January.
  • Handle: RePEc:bla:chinae:v:24:y:2016:i:1:p:63-84
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    File URL: http://hdl.handle.net/10.1111/cwe.12144
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    Cited by:

    1. Shujie Yao & Fan Zhang & Pan Wang & Dan Luo, 2017. "Location Determinants of China's Outward Foreign Direct Investment," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 25(6), pages 1-27, November.
    2. Yixiao Zhou & Runyang Zhang & Ligang Song, 2019. "How Funding Structure Affects Efficiency Of R&D Investment By Large- And Medium-Sized Industrial Firms In China? Evidence From Province-Level Panel Data," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(04), pages 921-938, September.

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