Technology Sanction and Firm R&D: Evidence From the US-China Trade Dispute

Kazunobu Hayakawa and Chih-hai Yang

No 950, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: The United States has implemented export control regulations targeting China. Specifically, it has included numerous Chinese companies on the Entity List, which comprises parties of concern. Exporters of regulated items or technology to these listed firms must secure permission from the US government, with the possibility of denial. This study investigates how this technology sanction hinders the R&D activities of sanctioned Chinese firms. To achieve this, we apply the matching method to firm-level data from 2015 to 2022. Our findings indicate that technology sanctions do not increase the R&D investment and R&D intensity, even though the total assets of sanctioned firms decline. When we separate the listed firms based on the license review policy (i.e., the nearly strict review), we again observe insignificant effects on R&D investment in either category of sanctioned firms. Notably, less strictly sanctioned firms accumulated more inventories, whereas more strictly sanctioned firms received increased financial support from the government in response to the technology sanctions.

Keywords: US–China; trade; war|Technology; sanction|Innovation (search for similar items in EconPapers)
JEL-codes: F15 F53 (search for similar items in EconPapers)
Date: 2025-01
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Published in IDE Discussion Paper = IDE Discussion Paper, No.950. 2025-01

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