Seminari - Bruno Cassiman

Bruno Cassiman (IESE Business School)will present his paper “Escaping Product Market Rivalry through Innovation,” alongside Dandan Xia (Utrecht University) and David Wehrheim (IESE Business School)

Abstract:

This study investigates the impact of an increase in product market rivalry through import competition from China on innovation of U.S. firms. U.S. firms that manufacture products more similar to Chinese imports are more likely to be affected and are thus exposed to a higher level of product market rivalry compared to other U.S. firms within the same industry. We compute the pairwise text similarity of product descriptions between U.S. firms and Chinese importing firms to measure the level of rivalry between firms. Using a continuous difference-in-difference method, we compare the innovation output of the U.S. firms that are more similar to the Chinese importers with that of the less similar U.S. firms five years before and after the Chinese firms start to export to the U.S. for the first time. We find that U.S. firms increase their patent production when facing more competitive pressure in the product market. U.S. firms that are more affected by competition also develop more new product patents and diversify into different business segments and technological areas.