Chinese Anti-dumping Protection and Firm Innovation: An Empirical Study with Firm Patent Data

He Huanlang; Zhang Juan; Zhang Tao

doi:doi:10.16538/j.cnki.jfe.2020.02.001

Summary

With the proposal of the “re-substantiation” strategy of European and American economy and the rise of the tide of anti-globalization, trade protectionism has risen again in the world, and the “war” of dumping and anti-dumping has become one of the crucial issues in current international trade. Moreover, frequently being subject to anti-dumping investigations, China has been the major country involved in anti-dumping for 20 consecutive years. Meanwhile, since the reform and opening up, a great many foreign products have rapidly flooded into the Chinese market with low price, causing damage to our domestic import-competing firms. In order to maintain the economic order of the market and protect the operation and development of those import-competing firms, the Chinese government initiated anti-dumping frequently, becoming one of the major sponsor countries of anti-dumping. The remedy effect of Chinese anti-dumping has aroused wide attention of scholars and policy-makers. A growing number of researches have studied the industry remedy effect of Chinese anti-dumping from the perspectives of productivity, survival rate and markup of firms, and obtained many research achievements. But from a more comprehensive perspective, there is an important aspect having been neglected, that is, can anti-dumping protection fundamentally improve the innovation ability of domestic firms? The independent innovation of firms is the core driving force for China’s innovation-driven development strategy as well as the basis of China’s great power strategy.

This paper analyzes the micro mechanism through which anti-dumping protection affects domestic firms’ innovation at the theoretical level. Based on China’s industrial firm data, China’s foreign anti-dumping data as well as China’s intellectual property office patent data from 1998 to 2008, this paper empirically tests the impact of China’s anti-dumping on the innovation of domestic firms and its mechanism. It measures the technological innovation level of firms by the total number of patents, the number of invention patents, the patent scope and the citations of patents. In order to reduce the endogeneity problem, this paper uses the difference-in-difference method and conducts the parallel trend test and a series of robust tests on basis of all the Chinese anti-dumping cases during the sample period. It comes to the following conclusions: Firstly, the initiation of anti-dumping has improved the innovation level of domestic protected firms and increased the patent number of domestic firms by 10.1%. Even after considering the parallel trend hypothesis and a series of robust tests, the estimation results still seem to be robust. Secondly, the scale economy effect is an important channel for anti-dumping to influence domestic firms’ innovation. Thirdly, the effect of anti-dumping on the innovation of domestic firms is various with their productivity and ownership. The initiation of anti-dumping has a bigger effect on high-productivity firms and private firms. Our conclusions imply that the government should boycott dumping of foreign companies by anti-dumping measures within the WTO framework, providing a fair market environment for domestic firms and improving the competitiveness of domestic firms.