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International Trade and R&D Investment: Evidence from Chinese Manufacturing Firms
Author(s) -
Zhou Yixiao,
Song Ligang
Publication year - 2016
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/cwe.12144
Subject(s) - diversification (marketing strategy) , china , investment (military) , economics , international economics , business , manufacturing , value (mathematics) , capital good , empirical research , empirical evidence , international trade , goods and services , market economy , philosophy , epistemology , marketing , machine learning , politics , political science , computer science , law
A current concern for China's long‐term growth prospect is whether China can become an innovative economy and achieve industrial upgrading to compensate for the gradually declining competitiveness resulting from low‐cost labor. The present study examines this issue by exploring how trade participation impacts on the R&D investment of manufacturing firms through various channels. Merging China's Annual Manufacturing Survey Dataset and the Chinese Customs Dataset allows us to study such a relationship at the individual firm level. The empirical results suggest that channels such as geographical diversification of export markets, share of imports from high‐income countries, average unit value of imports, number of intermediate goods and capital goods imports, and the trade regime are significant factors that influence firm‐level R&D investment. The study discusses the policy implications of the empirical findings in relation to industrial and trade policies that may be potentially beneficial for China's transition towards an innovative economy.