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Quality Innovation, Cost Innovation, Export, and Firm Productivity Evolution: Evidence from the Chinese Electronics Industry

Author

Listed:
  • Liu, Mengxiao
  • Wang, Luhang
  • Yi, Yimin

Abstract

This paper classifies innovation as quality-improving or cost-reducing and estimates a dynamic model incorporating firm export, quality innovation, and cost innovation decisions. Estimation results show that export, quality innovation, and cost innovation increase next-period firm productivity by 1.39%, 1.23%, and 1.27%, respectively. Additionally, quality innovation raises next-period export demand by 47%. Counterfactual analyses suggest that (1) foreign market growth has a larger impact on firm export and innovation decisions than domestic market growth, but neither market significantly affects firm productivity; (2) subsidizing continuing quality innovators generates the highest financial return, and subsidizing continuing cost innovators brings the most productivity gain.

Suggested Citation

  • Liu, Mengxiao & Wang, Luhang & Yi, Yimin, 2022. "Quality Innovation, Cost Innovation, Export, and Firm Productivity Evolution: Evidence from the Chinese Electronics Industry," MPRA Paper 113270, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:113270
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    References listed on IDEAS

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    More about this item

    Keywords

    export; quality innovation; cost innovation; firm productivity; dynamic estimation; neural network; machine learning; trade liberalization; innovation policy;
    All these keywords.

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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