Are R&D-intensive firms more resilient to trade shocks? Evidence from the U.S.–China trade war

Kenneth A. Kim, Hongjun Xie and Xiaojia Zheng

Journal of International Money and Finance, 2024, vol. 149, issue C

Abstract: We study whether research and development (R&D)-intensive Chinese firms were more resilient during the 2018–2019 U.S.-China trade war. Using an event study, we confirm that (unsurprisingly) Chinese exporting firms that were most affected by the new U.S. tariffs suffered larger valuation declines than other firms. However, among those most affected, those that were R&D intensive suffered significantly less severe declines. We also identify a channel that allowed R&D-intensive firms to better absorb the trade shock: their production efficiency improved amidst the trade war, due to enhanced operational efficiency and lower operating costs. Furthermore, in response to the trade disruptions, numerous R&D-intensive Chinese companies acquired U.S. firms.

Keywords: Trade shock; Tariffs; R&D; China; Trade war (search for similar items in EconPapers)
JEL-codes: F13 G14 O32 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:149:y:2024:i:c:s0261560624001955

DOI: 10.1016/j.jimonfin.2024.103208

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