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The Impact of Trade Liberalization on Firm Productivity and Innovation

Year: 2018

Type: article

Abstract: This chapter reviews the empirical economics literature on the impact of trade liberalization on firms’ innovation-related outcomes. We define and examine four types of shocks to trade flows: import competition, export opportunities, access to imported intermediates, and foreign input competition. Our review reveals interesting heterogeneities at the country and firm levels. In emerging countries, trade liberalization appears to spur productivity and innovation. In developed countries, export opportunities and access to imported intermediates tend to encourage innovation, but the evidence on import competition is mixed, especially for firms in the United States. At the firm level, the positive effects of trade on innovation are more pronounced at the initially more productive firms, while the negative effects are more pronounced at the initially less productive firms.

Source: Innovation Policy and the Economy

DOI: 10.1086/699932

Authors: Pian Shu, Claudia Steinwender

Institutions: Georgia Institute of Technology, National Bureau of Economic Research, Massachusetts Institute of Technology

Language: English

Topic: Global trade and economics

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, Industry, innovation and infrastructure

Open Access status: bronze

Funder: European Commission