Quality Innovation, Cost Innovation, Export, and Firm Productivity Evolution: Evidence from the Chinese Electronics Industry

Mengxiao Liu, Luhang Wang and Yimin Yi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper classifies innovation as quality-improving or cost-reducing and estimates a dynamic model incorporating firm export, quality innovation, and cost innovation decisions. Estimation results show that export, quality innovation, and cost innovation increase next-period firm productivity by 1.39%, 1.23%, and 1.27%, respectively. Additionally, quality innovation raises next-period export demand by 47%. Counterfactual analyses suggest that (1) foreign market growth has a larger impact on firm export and innovation decisions than domestic market growth, but neither market significantly affects firm productivity; (2) subsidizing continuing quality innovators generates the highest financial return, and subsidizing continuing cost innovators brings the most productivity gain.

Keywords: export; quality innovation; cost innovation; firm productivity; dynamic estimation; neural network; machine learning; trade liberalization; innovation policy (search for similar items in EconPapers)
JEL-codes: C45 F14 L1 L10 L25 (search for similar items in EconPapers)
Date: 2022-07
New Economics Papers: this item is included in nep-big, nep-cse, nep-dem, nep-eff, nep-int and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:113270

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