American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
Foreign Competition and Domestic Innovation: Evidence from US Patents
American Economic Review: Insights
vol. 2,
no. 3, September 2020
(pp. 357–74)
Abstract
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.Citation
Autor, David, David Dorn, Gordon H. Hanson, Gary Pisano, and Pian Shu. 2020. "Foreign Competition and Domestic Innovation: Evidence from US Patents." American Economic Review: Insights, 2 (3): 357–74. DOI: 10.1257/aeri.20180481Additional Materials
JEL Classification
- F14 Empirical Studies of Trade
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L60 Industry Studies: Manufacturing: General
- O19 International Linkages to Development; Role of International Organizations
- O31 Innovation and Invention: Processes and Incentives
- O34 Intellectual Property and Intellectual Capital
- P33 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid