How Different Kinds of Innovation Affect Trade Performance of Enterprises in China?

Abstract

The authors greatly acknowledge financial support from the Ministry of Education, P.R., China for the major research project “A Study on the Transformation of China’s Outward Pattern of Economic Development (13JJD790021)”.

Abstract

The paper aims to empirically investigate the impact of the different kinds of technological innovation on export performance of Chinese manufacturing industries. To do this, we distinguish between different dimensions of innovation activities including R&D intensity, innovation capability, invention intensity, skill intensity, foreign technology and new product development, and examine their distinct impact on industrial export. The fixed-effect and instrumental variable (IV) regression methods have been applied on a panel dataset of China’s two-digit manufacturing industries over the 1998-2013 period.  The results indicate that R&D intensity and innovation capability are significant determinants of export performance in China while the effect that innovation capability have made on export is greater than R&D intensity. In addition, invention intensity, skill intensity and foreign technology have broadly accelerated the export performance of China’s manufacturing industries. However, skill intensity and foreign technology have the relatively stronger effect on export among different kinds of innovation indicators. Furthermore, Chinese exports have greatly benefitted from the activities which are linked to the new product development. Our result reveal that China’s inclusion into WTO in 2002 has been a stimulating factor for country’s trade liberalisation process. These results are robust to several tests and sensitivity checks, as well as alternative measures on various channels of technological innovation. The evidence has significant policy lessons for China and other emerging countries.

Keywords: R&D, Innovation output, Invention intensity, New product development, Foreign Technology transfer, Export performance

DOI: 10.7176/JESD/10-10-07

Publication date:May 31^st 2019