Import Competition and Innovation at the Plant Level: Evidence from Mexico

摘要: Economists have long been interested in whether competition spurs innovation, and if so how. Theoretical predictions remain ambiguous, however, it has difficult to investigate this relationship empirically because R&D expenditure data is rarely available at the plant level. This paper takes advantage of a newly constructed combination Mexican plant-level datasets examine extent which tariff changes lead through increased competition. The combined dataset two unique features: contains (1) amount on product innovation process (2) trade-classification categories plants’ outputs inputs, allows me construct control for industry time effects. degree reduction not correlated with initial characteristics, suggesting that exogenous plants. key finding tariffs goods produced by plants induced those increase total R&D. Analysis information separately suggests trade liberalization affects capability effects incentives cost efficiency rather than create new products or upgrade quality. I also find pattern would be discernable using measures behavior exposure typical – measured factor productivity industry-level average tariffs.