Trade policy uncertainty and innovation: Firm level evidence from China’s WTO accession

By Qing Liu, Hong Ma. Journal of International Economics, 2020

214 citations recorded by the source corpus.

Abstract This study proposes a novel channel through which trade liberalization may induce innovation through the reduction of trade policy uncertainties (TPU) in destination markets. To verify this linkage, we utilize the significant reduction of TPU engendered by China’s accession to the World Trade Organization (WTO) in 2001 as a quasi-natural experiment. We find that reduction in TPU significantly encourages firms’ patent application: firms in sectors with a larger reduction in uncertainty filed more invention patent applications after China’s WTO accession. We also find that firms’ innovation responses to TPU reduction vary by productivity, ownership, exporting status, and the irreversibility of investment.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/3cd6658d29b3677b7b8f2d80de954510dab3c363