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Proximity to the Frontier, Markups, and the Response of Innovation to Foreign Competition : Evidence from Matched Production-Innovation Surveys in Chile

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  • Cusolito,Ana Paula,Garcia Marin,Alvaro Felipe,Maloney,William F.

Abstract

This paper employs a matched firm production/innovation panel data set from Chile to explore the response of firm innovation to the increased competition arising from the China shock. In addition to covering a wider range of innovation inputs and outputs than previously possible, the data allow generating measures of markups and efficiency (physical total factor productivity) that correspond more closely to the concepts of rents and technological leadership envisaged in the Schumpeterian literature. Except for the 10 percent most productive plants, increased competition depresses most measures of innovation. Falling rents exacerbate declines among laggards, while rising rents further increase innovation among leaders.

Suggested Citation

  • Cusolito,Ana Paula,Garcia Marin,Alvaro Felipe,Maloney,William F., 2021. "Proximity to the Frontier, Markups, and the Response of Innovation to Foreign Competition : Evidence from Matched Production-Innovation Surveys in Chile," Policy Research Working Paper Series 9757, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9757
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    Keywords

    International Trade and Trade Rules; Food&Beverage Industry; Business Cycles and Stabilization Policies; Pulp&Paper Industry; General Manufacturing; Construction Industry; Plastics&Rubber Industry; Textiles; Apparel&Leather Industry; Common Carriers Industry; Real&Intellectual Property Law; Social Policy; Regulatory Regimes; Legal Products; Common Property Resource Development; Intellectual Property Rights; Legal Reform; Legislation; Judicial System Reform; Trade and Services; Financial Sector Policy;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • 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

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