TY - UNPD A1 - Iacovone, Leonardo A1 - Keller, Wolfgang A1 - Rauch, Ferdinand T1 - Innovation responses to import competition N2 - How does trade liberalization that raises a country’s import competition affect the innovative activity of its firms? We exploit the strong growth of Chinese exports resulting from China’s entry into the World Trade Organization in 2001 as a competitive shock to, specifically, Mexican manufacturing firms. Innovation is captured through information on the adoption of detailed firm level production techniques such as just in time inventory methods, quality control measures, and job rotation among the Mexican firms. Our results indicate that China’s rise in global trade did not affect by much Mexico’s rate of innovation, which contrasts with the substantial gains that others have found in the case of bilateral iberalizations. At the same time, there is a striking heterogeneity in the responses across firms for different productivities, with productive firms innovating more and less productive firms innovating less, which leads to positive selection in that initial differences in firm performance are sharpened by the advent of new competition. We discuss the implications of these findings for theories of trade and innovation. Y1 - 2011 UR - https://opus4.kobv.de/opus4-hsog/frontdoor/index/index/docId/2946 UR - https://pdfs.semanticscholar.org/55d4/4ed62dbefe54fd318ce1b4035d9dbff45ddc.pdf ER -