Intermediate input imports and innovation : evidence from Chinese firms

Qing LIU; Larry D. QIU

doi:10.1016/j.jinteco.2016.09.009

Intermediate input imports and innovation : evidence from Chinese firms

Qing LIU, Larry D. QIU^*

^*Corresponding author for this work

Research output: Journal Publications › Journal Article (refereed) › peer-review

305 Citations (Scopus)

Abstract

Innovation plays a key role in economic growth. In this paper, we investigate the effects of intermediate input tariff reduction on the innovation activities of domestic firms. Input tariff reduction has two opposite effects on the innovation decision of a firm: it may promote innovation because the cost of innovation activities decreases, but it may also result in a decrease in innovation because foreign technologies become cheaper. We use Chinese firm-level data from 1998 to 2007, which features a drastic input tariff cut in 2002 because of China's WTO accession, and find that input tariff cut results in less innovation undertaken by Chinese firms. The findings are obtained using the difference-in-differences technique and are robust to various specifications checks of the model. We also provide a theoretical framework to generate insights to the empirical findings.

Original language	English
Pages (from-to)	166-183
Number of pages	18
Journal	International Economics
Volume	103
Early online date	5 Oct 2016
DOIs	https://doi.org/10.1016/j.jinteco.2016.09.009
Publication status	Published - Nov 2016
Externally published	Yes

Bibliographical note

We benefitted from discussions with Elhanan Helpman, Hong Ma, Marc Melitz, Tommy Wu, Xi Weng, Li-an Zhou and the presentation at The UIBE International Trade Workshop (October 2014) and The Hong Kong Economic Association Conference (December 2014), seminar at Guanghua School of Management, Peking University (March 2015) and Bologna University (April 2015), Summer Workshop of HKIMR (August 2015), The HKU International Trade Workshop (December 2015), Kobe University (2015), The Hitotsubashi-Peking University Workshop on Trade & Development (March 2016). We thank Chaoqun Zhan for his assistance in our research and the referees for their excellent comments and suggestions. Qiu appreciates financial support from HKIMR for visiting scholarship and Chung Hon-Dak Endowed Professorship in Economic Development.

Keywords

Trade liberalization
Intermediate input
Innovation
Patent

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

Access to Document

10.1016/j.jinteco.2016.09.009

Cite this

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title = "Intermediate input imports and innovation : evidence from Chinese firms",

abstract = "Innovation plays a key role in economic growth. In this paper, we investigate the effects of intermediate input tariff reduction on the innovation activities of domestic firms. Input tariff reduction has two opposite effects on the innovation decision of a firm: it may promote innovation because the cost of innovation activities decreases, but it may also result in a decrease in innovation because foreign technologies become cheaper. We use Chinese firm-level data from 1998 to 2007, which features a drastic input tariff cut in 2002 because of China's WTO accession, and find that input tariff cut results in less innovation undertaken by Chinese firms. The findings are obtained using the difference-in-differences technique and are robust to various specifications checks of the model. We also provide a theoretical framework to generate insights to the empirical findings.",

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author = "Qing LIU and QIU, {Larry D.}",

note = "We benefitted from discussions with Elhanan Helpman, Hong Ma, Marc Melitz, Tommy Wu, Xi Weng, Li-an Zhou and the presentation at The UIBE International Trade Workshop (October 2014) and The Hong Kong Economic Association Conference (December 2014), seminar at Guanghua School of Management, Peking University (March 2015) and Bologna University (April 2015), Summer Workshop of HKIMR (August 2015), The HKU International Trade Workshop (December 2015), Kobe University (2015), The Hitotsubashi-Peking University Workshop on Trade & Development (March 2016). We thank Chaoqun Zhan for his assistance in our research and the referees for their excellent comments and suggestions. Qiu appreciates financial support from HKIMR for visiting scholarship and Chung Hon-Dak Endowed Professorship in Economic Development.",

year = "2016",

month = nov,

doi = "10.1016/j.jinteco.2016.09.009",

language = "English",

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AU - QIU, Larry D.

N1 - We benefitted from discussions with Elhanan Helpman, Hong Ma, Marc Melitz, Tommy Wu, Xi Weng, Li-an Zhou and the presentation at The UIBE International Trade Workshop (October 2014) and The Hong Kong Economic Association Conference (December 2014), seminar at Guanghua School of Management, Peking University (March 2015) and Bologna University (April 2015), Summer Workshop of HKIMR (August 2015), The HKU International Trade Workshop (December 2015), Kobe University (2015), The Hitotsubashi-Peking University Workshop on Trade & Development (March 2016). We thank Chaoqun Zhan for his assistance in our research and the referees for their excellent comments and suggestions. Qiu appreciates financial support from HKIMR for visiting scholarship and Chung Hon-Dak Endowed Professorship in Economic Development.

PY - 2016/11

Y1 - 2016/11

N2 - Innovation plays a key role in economic growth. In this paper, we investigate the effects of intermediate input tariff reduction on the innovation activities of domestic firms. Input tariff reduction has two opposite effects on the innovation decision of a firm: it may promote innovation because the cost of innovation activities decreases, but it may also result in a decrease in innovation because foreign technologies become cheaper. We use Chinese firm-level data from 1998 to 2007, which features a drastic input tariff cut in 2002 because of China's WTO accession, and find that input tariff cut results in less innovation undertaken by Chinese firms. The findings are obtained using the difference-in-differences technique and are robust to various specifications checks of the model. We also provide a theoretical framework to generate insights to the empirical findings.

AB - Innovation plays a key role in economic growth. In this paper, we investigate the effects of intermediate input tariff reduction on the innovation activities of domestic firms. Input tariff reduction has two opposite effects on the innovation decision of a firm: it may promote innovation because the cost of innovation activities decreases, but it may also result in a decrease in innovation because foreign technologies become cheaper. We use Chinese firm-level data from 1998 to 2007, which features a drastic input tariff cut in 2002 because of China's WTO accession, and find that input tariff cut results in less innovation undertaken by Chinese firms. The findings are obtained using the difference-in-differences technique and are robust to various specifications checks of the model. We also provide a theoretical framework to generate insights to the empirical findings.

KW - Trade liberalization

KW - Intermediate input

KW - Innovation

KW - Patent

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DO - 10.1016/j.jinteco.2016.09.009

M3 - Journal Article (refereed)

SN - 2110-7017

VL - 103

SP - 166

EP - 183

JO - International Economics

JF - International Economics

ER -

Intermediate input imports and innovation : evidence from Chinese firms

Abstract

Bibliographical note

Keywords

UN SDGs

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