Does Innovation Matter for Chinese High - Tech

This paper examines the effect of innovation on export decision in Chinese high-tech firms during the period of 2005-2007. Using a parametric, instrumental variable approach and a non-parametric matching method, we find that firm-level innovation efforts, measured by R&D spending and new product output, play only a minor role for domestic exporters. Foreign-invested firms dominate the high-tech exports but do not rely on indigenous innovation activities. These results thus confirm prior findings that the success of Chinese high-tech exports does not result from heavy R&D expenditure and technological progress. Moreover, different types of innovation measures show different impacts on the likelihood of exporting. The impacts of innovation on exporting vary widely across industries and Chinese regions.