Abstract
How does opening up the Chinese market to US firms affect innovation? Drawing from the demand-driven innovation perspective, we propose: cost spreading associated with new demand opportunities encourages firms to innovate; user innovation encourages US firms to adopt technologies that originated from China when they innovate. We examine a sample taken from Compustat-listed firms’ innovation activity following China joining the World Trade Organization (WTO) in 2001. Using both difference-in-differences (DID) and instrumental variable (IV) analyses, we show that US firms generate more patents and are more likely to cite patents that originated in China when facing the new market demand opportunity. The effect becomes stronger as the level of US exports to China increases, and is weaker for firms with larger scale or scope.
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
