Can Technology Transfers Save Innovation? Evidence from China

Zhangfeng Jin () and Klaus Prettner

Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics

Abstract: This paper examines the impact of technology transfers on long-term innovation. We propose an extended Schumpeterian growth framework to characterize the channels by which technology transfers impact on innovation. Exploiting variations in the adoption of Soviet-aided industrialization programs across Chinese cities, we find that firms located in cities affected by 156 major industrial projects of the Soviet Union witness fewer Investments in research and development on average after nearly half a century. The effect is particularly pronounced for non-state-owned firms. The decline in innovation inputs is further supported by a lower probability of patenting in these localities. A likely underlying mechanism is the low adoption of performance-based reward systems that influence labor reallocation within firms, rather than inadequate capital and skilled workers. Despite prior successes during the planned economy era, the adoption of such foreign aid tends to impede innovation as China transitions towards a more market-oriented economy.

Keywords: Foreign Aid; Technology Transfers; Innovation Inputs; Pay for Performance; China (search for similar items in EconPapers)
JEL-codes: F35 M52 O30 (search for similar items in EconPapers)
Date: 2025-04
New Economics Papers: this item is included in nep-cna, nep-cse, nep-his, nep-ppm and nep-sbm
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Working Paper: Can Technology Transfers Save Innovation? Evidence from China (2025)
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