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

Johan Hombert () and Adrien Matray ()

No 1075, HEC Research Papers Series from HEC Paris

Abstract: The authors study whether R&D-intensive firms are more resilient to trade shocks. They correct for the endogeneity of R&D using tax-induced changes to the cost of R&D. On average across US manufacturing firms, rising imports from China lead to slower sales growth and lower profitability. These effects are, however, significantly smaller for firms with a larger stock of R&D -- by about half when moving from the 25th percentile to the 75th percentile of the R&D stock distribution. As a result, while the average firm in import-competing industries cuts capital expenditures and employment, R&D-intensive firms downsize considerably less.

Keywords: R&D; Innovation; Product Market Competition; Trade Shocks (search for similar items in EconPapers)
JEL-codes: F14 G31 O33 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014-12-24
New Economics Papers: this item is included in nep-cfn, nep-cna, nep-cse, nep-ino, nep-int, nep-sbm and nep-tra
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1075

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