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Import and innovation: Evidence from Chinese firms

Zhiyuan Chen, Jie Zhang and Wenping Zheng

European Economic Review, 2017, vol. 94, issue C, 205-220

Abstract: This paper investigates the relationship between imports and innovation by importing firms. We first construct a theoretical model in which imports stimulate innovation through cost-reducing knowledge spillovers. We then employ a combined micro dataset of Chinese manufacturing firms to estimate the effects of imported intermediates on the firm's R&D investment. The dataset allows us to construct firm-year level instruments for importing and exporting that are uncorrelated with the innovation decision of the firm. Our estimations find that: (1) importing intermediates tends to increase importing firms’ R&D intensity; and that (2) exporting also increases importing firms' R&D intensity. Examining the channels through which importing affects innovation, we find that importing from high-income sources has a greater impact on innovation. High-tech firms tend to experience greater increases in innovation intensity, as do private firms. Our results are supported by a series of robustness checks.

Keywords: Imports; Exports; R&D intensity (search for similar items in EconPapers)
JEL-codes: F14 F61 O31 (search for similar items in EconPapers)
Date: 2017
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