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Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China?

Abstract : We study whether R&D-intensive firms are more resilient to trade shocks. We correct for the endogeneity of R&D using tax-induced changes to R&D cost. While rising imports from China lead to slower sales growth and lower profitability, these effects are significantly smaller for firms with a larger stock of R&D (by about half when moving from the bottom quartile to the top quartile of R&D). We provide evidence that this effect is explained R&D allowing firms to increase product differentiation. As a result, while firms in import-competing industries cut capital expenditures and employment, R&D-intensive firms downsize considerably less.
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https://hal-hec.archives-ouvertes.fr/hal-02011417
Contributor : Antoine Haldemann <>
Submitted on : Thursday, February 7, 2019 - 8:57:28 PM
Last modification on : Friday, February 8, 2019 - 1:28:23 AM

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  • HAL Id : hal-02011417, version 1

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Johan Hombert, Adrien Matray. Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China?. 2014. ⟨hal-02011417⟩

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