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Import and innovation: Evidence from Chinese firms

Author

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  • Chen, Zhiyuan
  • Zhang, Jie
  • Zheng, Wenping

Abstract

This paper investigates the relationship between imports and innovation by importing firms. We first construct a theoretical model in which imports stimulate innovation through cost-reducing knowledge spillovers. We then employ a combined micro dataset of Chinese manufacturing firms to estimate the effects of imported intermediates on the firm's R&D investment. The dataset allows us to construct firm-year level instruments for importing and exporting that are uncorrelated with the innovation decision of the firm. Our estimations find that: (1) importing intermediates tends to increase importing firms’ R&D intensity; and that (2) exporting also increases importing firms' R&D intensity. Examining the channels through which importing affects innovation, we find that importing from high-income sources has a greater impact on innovation. High-tech firms tend to experience greater increases in innovation intensity, as do private firms. Our results are supported by a series of robustness checks.

Suggested Citation

  • Chen, Zhiyuan & Zhang, Jie & Zheng, Wenping, 2017. "Import and innovation: Evidence from Chinese firms," European Economic Review, Elsevier, vol. 94(C), pages 205-220.
    • Handle: RePEc:eee:eecrev:v:94:y:2017:i:c:p:205-220
    DOI: 10.1016/j.euroecorev.2017.02.008
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    More about this item

    Keywords

    Imports; Exports; R&D intensity;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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