Technology Transfer and Early Industrial Development: Evidence from the Sino-Soviet Alliance

Abstract

This paper studies the short and long-run effects of international technology transfer on early industrial development, using evidence from the Sino-Soviet Alliance. Between 1950and 1957, the Soviet Union supported the so-called “156 technology transfer projects” in China, that involved the construction of large capital-intensive plants in heavy industries, the transfer of state-of-the-art Soviet machinery and equipment, as well as technical assistance and know-how diffusion from Soviet engineers to the Chinese counterpart. We hand-collected archival data on the 156 projects that we complemented with plant, firm and provincial-level information from 1949 to 2013. To estimate the causal effect of the program we exploit that, due to unanticipated political tensions between the two countries, some projects were built as planned with Soviet machinery and technical assistance (treated projects), while others were eventually realized by China only without any Soviet technology or assistance (comparison projects). We find that: 1) plants in treated projects had better performance that plants in comparison projects in both the short and the long run; 2) Soviet technical assistance diffused industry-specific knowledge through the training of Chinese engineers that further increased plant outcomes; 3) the program generated local horizontal and vertical spillovers; 4) there was a substantial reallocation of production in treated project counties from state owned to privately-owned companies after the waves of privatization started in 2005.