The impact of competition with China in the US market on innovation in Mexican manufacturing firms

• Published in: Latin American economic review Vol. 28; no. 1; pp. 1 - 21
• Main Authors: Meza González, Liliana, Sepulveda, Jaime Marie
• Format: Journal Article
• Language: English
• Published: Heidelberg Springer 29-05-2019; Springer Berlin Heidelberg; Economica
• Subjects: Boating industry; Companies; Competition; Developing country; Development Economics; Economic Policy; Economics; Economics and Finance; Educational Policy and Politics; Environmental Economics; Escape; Foreign competition; Innovations; Labor Economics; Manufacturing; Manufacturing sector; Market shares; Regional/Spatial Science; Research Article; Technological innovation; United States > US; China; F6; Technological innovation; O3; Manufacturing sector; O5; Developing country; Foreign competition; L6
• ISSN: 2196-436X; 2198-3526; 2196-436X
• DOI: 10.1186/s40503-019-0067-3

Using data from 6378 Mexican firms for the 2012-2013 period, this paper estimates the effect of competition with China for the US market on the innovation efforts of the Mexican manufacturing sector. After controlling for the influence of several variables, we find a U-curve shaped relationship between foreign competition (measured by the China effect) and the innovation of Mexican manufacturing firms in products, in processes, and for the world. Given that the quadratic positive effect is much larger than the negative linear effect, we conclude that an Escape-Competition effect dominates when Mexican firms are fighting for a larger market share with China in the US.