Intermediate Imports, Institutional Environment, and Export Product Quality Upgrading: Evidence from Chinese Micro-Level Enterprises

Abstract

ABSTRACT Based on matched data from the Chinese industrial enterprise database and General Administration of Customs (GAC) database for 2000–2013, this paper examines export manufacturers in the context of significantly varying institutional environments to investigate how intermediate imports and the institutional environment affect export product quality. The results show that, first, intermediate imports affect product quality through four channels: the competition effect, knowledge spillover effect, intermediate quality effect, and intermediate diversification effect. Second, improvement in the institutional environment has a direct and positive impact on product quality, as well as strengthening the effect of intermediate imports; in this sense, the two factors are complementary in influencing market share reallocation. Third, the investigation of the import duration impact on product quality from dynamic perspectives shows a U-shaped correlation. This paper provides a theoretical and practical basis for strengthening the international competitiveness of China’s export products and improving the regional institutional environment.