Import competition and firm innovation: Evidence from China

This paper investigates whether and how import competition affects firm innovation. Using China's World Trade Organization (WTO) accession as a quasi-natural experiment, we find that import competition reduces firm innovation, which is consistent with the Schumpeterian effect. We also find heterogeneous treatment effects across firm productivity and patent types in a way consistent with preference and knowledge spillover effects, but not with escape-competition and trapped-factor effects.