Does Import Competition Induce R&D Reallocation? Evidence from the U.S

Rui Xu and Kaiji Gong

No 2017/253, IMF Working Papers from International Monetary Fund

Abstract: We analyze the impact of rising import competition from China on U.S. innovative activities. Using Compustat data, we find that import competition induces R&D expenditures to be reallocated towards more productive and more profitable firms within each industry. Such reallocation effect has the potential to offset the average drop in firm-level R&D identified in the previous literature. Indeed, our quantitative analysis shows no adverse impact of import competition on aggregate R&D expenditures. Taking the analysis beyond manufacturing, we find that import competition has led to reallocation of researchers towards booming service industries, including business and repairs, personal services, and financial services.

Keywords: WP; import competition; R&D expenditure; reallocation effect; Chinese Import Competition; R&D Expenditures; Reallocation; R&D investment; firm TFP; TFP deviation; Competition; Imports; Services sector; Manufacturing; North America (search for similar items in EconPapers)
Pages: 44
Date: 2017-11-16
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Citations: View citations in EconPapers (17)

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