Is the Impact of International Trade on Innovation in the Eye of the Beholder? Views from China, France and Sweden
Paper Session
Sunday, Jan. 9, 2022 3:45 PM - 5:45 PM (EST)
- Chair: Daniel Trefler, University of Toronto
Exporting Ideas: Knowledge Flows from Expanding Trade in Goods
Abstract
Combining French firm-level administrative, customs and patent data over 1995-2012, and using a difference-in-differences identification strategy with a staggered treatment design, we show that entry by a French firm into a new export market increases its patents' citations received from that destination. The citations generated by the entry are also of higher quality. These citations, linked to the new export relationship, happens both inside and outside of global value chains. Moreover those technological spillovers are stronger for French firms with higher quality patents and in destination countries technologically close to the firm.The Dynamic Impact of Exporting on Firm R&D Investment
Abstract
This article estimates a dynamic structural model of firm R&D investment in twelve Swedish manufacturing industries and uses it to measure rates of return to R&D and to simulate the impact of trade restrictions on the investment incentives. R&D spending is found to have a larger impact on firm productivity in the export market than in the domestic market. Export market profits are a substantial source of the expected return to R&D. Counterfactual simulations show that trade restrictions lower both the expected return to R&D and R&D investment level, thus reducing an important source of the dynamic gains from trade. A 20 percent tariff on Swedish exports reduces the expected benefits of R&D by an average of 32.2 percent and lowers the amount of R&D spending by 13.9 percent in the high-tech industries. The corresponding reductions in the low-tech industries are 30.4 and 8.9 percent, respectively. R&D adjustments in response to export tariffs mainly occur on the intensive, rather than the extensive, margin.Trade and Innovation: The Role of Scale and Competition Effects
Abstract
It is now well understood that increased export opportunities can enhance innovation by increasing the size of a firm’s market. At the same time, firms in a larger market face tougher competition, which can either promote or retard innovation (as in the escape-the-competition effects of Aghion et al., 2001). To better understand this tension between scale and competition we turn to the Chinese experience. We measure innovation very broadly to include patents, R&D expenditures, and the fraction of sales accounted for by new products. We measure competition using a variety of measures including the number of firms, Herfindahl indexes, and Lerner indexes. We examine changes in scale due to both growth in the domestic market and to growth in export opportunities. We are particularly concerned about the endogeneity of exporting and offer a powerful instrument: It is the product of the growth in a firm’s export market conditional on exporting (similar to a standard Bartik instrument) times the probability of the firm exporting. The latter component is new to the literature. We have two findings. First, scale (whether driven by growth in the firm’s domestic market or export market) is an important driver of firm-level innovation. Further, there is considerable heterogeneity in how scale impacts firms at different levels of productivity and size. Second, we find that competition effects drive innovation and in heterogeneous ways that are consistent with escape-the-competition motives.Discussant(s)
Pamela Medina Quispe
,
University of Toronto
Swapnika Rachapalli
,
University of British Columbia
Scott Orr
,
University of British Columbia
Bingjing Crystal Li
,
Chinese University of Hong Kong
JEL Classifications
- F6 - Economic Impacts of Globalization
- F1 - Trade