Les Cahiers de Recherche - HEC Paris
Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China?
() and Adrien Matray
Abstract: The authors study whether R&D-intensive firms are more
resilient to trade shocks. They correct for the endogeneity of R&D using
tax-induced changes to the cost of R&D. On average across US manufacturing
firms, rising imports from China lead to slower sales growth and lower
profitability. These effects are, however, significantly smaller for firms
with a larger stock of R&D -- by about half when moving from the 25th
percentile to the 75th percentile of the R&D stock distribution. As a
result, while the average firm in import-competing industries cuts capital
expenditures and employment, R&D-intensive firms downsize considerably
Keywords: R&D; Innovation; Product Market Competition; Trade Shocks; (follow links to similar papers)
JEL-Codes: F14; G31; O33; (follow links to similar papers)
39 pages, December 24, 2014
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