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Foreign Competition and Domestic Innovation: Evidence from U.S. Patents

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

Abstract

Manufacturing accounts for more than three-quarters of U.S. corporate patents. The competitive shock to this sector emanating from China’s economic ascent could in theory either augment or stifle U.S. innovation. Using three decades of U.S. 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 U.S. firms. Accounting for confounding sectoral patenting trends, we find that U.S. patent production declines in sectors facing greater import competition. This adverse effect is larger among initially less profitable and less capital-intensive firms.

Suggested Citation

  • David H. Autor & David Dorn & Gordon H. Hanson & Gary Pisano & Pian Shu, 2019. "Foreign Competition and Domestic Innovation: Evidence from U.S. Patents," CESifo Working Paper Series 7865, CESifo.
  • Handle: RePEc:ces:ceswps:_7865
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    Keywords

    innovation; patents; trade;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • 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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