Foreign Competition and Domestic Innovation: Evidence from US Patents

By David H. Autor, David Dorn, Gordon H. Hanson, Gary P. Pisano, Pian Shu. American Economic Review: Insights, 2020

198 citations recorded by the source corpus.

Manufacturing accounts for more than three-quarters of US corporate patents. The competitive shock to this sector emanating from China’s economic ascent could in theory either augment or stifle US innovation. Using three decades of US patents matched to corporate owners, we quantify how foreign competition affects domestic innovation. Rising import exposure intensifies competitive pressure, reducing sales, profitability, and R&D expenditure at US firms. Accounting for confounding sectoral patenting trends, we find that US patent production declines in sectors facing greater import competition. This adverse effect is larger among initially less profitable and less capital-intensive firms. (JEL F14, L11, L60, O19, O31, O34, P33)

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/ca0ad37486717959c05eae67697c124ac75bc170

Citations in the corpus

• Productivity growth in Italy: a tale of a slow-motion change (2018, unknown): “Autor et al. (2016) find instead a negative impact of Chinese import penetration on US manufacturing firms’ patents.”
• Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China? (2015, unknown): “…Aghion et al. (2005) instrument for import competition using the introduction of the European Single Market; Bloom, Draca, and Van Reenen (2016) use the removal of product-specific quotas following China’s entry into the WTO; and Autor et al. (2016) use imports in other high-income countries.”
• Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share (2018, unknown): “, Autor et al. (2017b) conclude that the falling labor share is more likely accounted for by the rise of ‘winner take most’ competition rather than direct capital-labor or trade-labor substitution—though this change in the nature of competition may itself be a technologically induced phenomenon.”
• Firm Response to Competitive Shocks: Evidence from China’s Minimum Wage Policy (2020, unknown): “Similar negative effects on U.S. firm investment and patenting are reported by Autor et al. (2016), whereas Bloom, Draca and van Reenen (2016) find that firms across 12 European countries innovated more when facing intensifying product market competition.”
• The Heterogeneous Impact of Market Size on Innovation: Evidence from French Firm-Level Exports (2022, unknown): “…and innovation that focuses on the impact of import competition on domestic firms (Bloom, Draca, & Van Reenen, 2016; Iacovone et al., 2011; Autor, Dorn, Hanson et al., 2020; and Bombar-dini, Li, & Wang, 2017) investigate whether import competition induces firms to innovate more in order to…”
• The cost of non-Europe, revisited* (2019, unknown): “Autor et al. (2016) find a contrasting negative impact on US firms.”