U.S. Innovation and Chinese Competition for Innovation Production

Publish Date: Nov 1, 2019    Last Update: Nov 1, 2019

Abstract

We examine how competitive shocks from China impact U.S. innovation through two distinct margins: the markets for innovation and existing products. We identify shocks to both using the geography of Chinese internet penetration and Chinese import data. Increases in the ability of Chinese industry peers to gather knowledge are followed by sharp reductions in U.S. R&D investment and subsequent patents, and increased patenting by Chinese firms. The new Chinese patents also cite the patents of treated U.S. firms at a high rate consistent with increased intellectual property competition. Overall, Chinese competition in intellectual property and in existing products influence U.S. firm innovation.

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