Publication:
Technological Decoupling? The Impact on Innovation of US Restrictions on Chinese Firms

Loading...
Thumbnail Image
Files in English
English PDF (1.78 MB)
291 downloads
English Text (147.38 KB)
25 downloads
Date
2024-10-23
ISSN
Published
2024-10-23
Author(s)
Cao, Yu
De Nicola, Francesca
Timmis, Jonathan
Editor(s)
Abstract
Recent U.S.-China tensions have raised the specter of technological decoupling. This paper examines the impact of U.S. export restrictions and technology licensing on Chinese firms’ innovation. It finds that U.S. sanctions reduce the quantity and quality of patent outputs of targeted Chinese firms, primarily due to decreased collaboration with U.S. inventors. However, firms with higher initial patent stock or in sectors with a smaller technological distance to the U.S. are less affected. Sanctions in specific technology fields lead to a decline in the patent output of both Chinese firms with U.S. collaborators and U.S. firms with Chinese collaborators.
Link to Data Set
Citation
Cao, Yu; De Nicola, Francesca; Mattoo, Aaditya; Timmis, Jonathan. 2024. Technological Decoupling? The Impact on Innovation of US Restrictions on Chinese Firms. Policy Research Working Paper; 10950. © World Bank. http://hdl.handle.net/10986/42282 License: CC BY 3.0 IGO.
Associated URLs
Associated content
Report Series
Report Series
Other publications in this report series
  • Publication
    Disentangling the Key Economic Channels through Which Infrastructure Affects Jobs
    (Washington, DC: World Bank, 2025-04-03) Vagliasindi, Maria; Gorgulu, Nisan
    This paper takes stock of the literature on infrastructure and jobs published since the early 2000s, using a conceptual framework to identify the key channels through which different types of infrastructure impact jobs. Where relevant, it highlights the different approaches and findings in the cases of energy, digital, and transport infrastructure. Overall, the literature review provides strong evidence of infrastructure’s positive impact on employment, particularly for women. In the case of electricity, this impact arises from freeing time that would otherwise be spent on household tasks. Similarly, digital infrastructure, particularly mobile phone coverage, has demonstrated positive labor market effects, often driven by private sector investments rather than large public expenditures, which are typically required for other large-scale infrastructure projects. The evidence on structural transformation is also positive, with some notable exceptions, such as studies that find no significant impact on structural transformation in rural India in the cases of electricity and roads. Even with better market connections, remote areas may continue to lack economic opportunities, due to the absence of agglomeration economies and complementary inputs such as human capital. Accordingly, reducing transport costs alone may not be sufficient to drive economic transformation in rural areas. The spatial dimension of transformation is particularly relevant for transport, both internationally—by enhancing trade integration—and within countries, where economic development tends to drive firms and jobs toward urban centers, benefitting from economies scale and network effects. Turning to organizational transformation, evidence on skill bias in developing countries is more mixed than in developed countries and may vary considerably by context. Further research, especially on the possible reasons explaining the differences between developed and developing economies, is needed.
  • Publication
    Economic Consequences of Trade and Global Value Chain Integration
    (World Bank, Washington, DC, 2025-04-04) Borin, Alessandro; Mancini, Michele; Taglioni, Daria
    This paper introduces a new approach to measuring Global Value Chains (GVC), crucial for informed policy-making. It features a tripartite classification (backward, forward, and two-sided) covering trade and production data. The findings indicate that traditional trade-based GVC metrics significantly underestimate global GVC activity, especially in sectors like services and upstream manufacturing, and overstate risks in early trade liberalization stages. Additionally, conventional backward-forward classifications over-estimate backward linkages. The paper further applies these measures empirically to assess how GVC participation mediates the impact of demand shocks on domestic output, highlighting both the exposure and stabilizing potential of GVC integration. These new measures are comprehensively available on the World Bank’s WITS Platform, providing a key resource for GVC analysis.
  • Publication
    Participation in Pension Programs in Low- and Middle-Income Countries
    (Washington, DC: World Bank, 2025-04-24) Giles, John; Joubert, Clément; Tanaka, Tomoaki
    Low- and middle-income countries are aging rapidly but stagnation of growth in participation in pension programs, due to widespread informal employment, presents a major fiscal challenge. Some claim that improving the design of pension program rules can encourage more pension contributions, while others push for universal non-contributory pensions. This paper reviews the recent academic literature on the determinants of active participation in pension systems in high- informality settings. An emerging body of evidence shows that participation responds significantly to financial incentives as well as nonfinancial obstacles. At the same time, pensions are imperfect substitutes for other strategies to cover longevity risk, including support through the family, which will remain crucial for many older people in fiscally constrained environments. Therefore, policy makers should integrate the design of contributory pensions, social pensions, and policies that facilitate other forms of elderly support and consider how all three interact. To inform such efforts, these interactions must be more systematically investigated, and the empirical evidence must be expanded beyond a small number of middle-income countries.
  • Publication
    Capitalizing on Digital Transformation to Enhance the Effectiveness of Property Institutions
    (Washington, DC: World Bank, 2025-04-14) Deininger, Klaus; Hilhorst, Thea; Zevenbergen, Jaap; Nkurunziza, Emmanuel
    Property registries have long been a pillar of state capacity and a basis for private market activity. While registry establishment and operation traditionally were costly and time consuming, digital technology makes low-cost registry operation and wide outreach easier. To guide developing countries aiming to establish such registries and measure progress, this paper develops indicators (in terms of digital coverage, interoperability, and property taxation for local service delivery and public land management) of effective digital registry service provision. Data from 85 countries highlight vast differences and provide suggestions for strategic reforms as well as a basis for measuring progress over time. Expanding geographical coverage and collecting these indicators on a regular basis could provide guidance to improve the way in which, by protecting property, the state creates the basis for widely shared prosperity and a livable environment.
  • Publication
    Bridging the Gap
    (Washington, DC: World Bank, 2025-04-21) Kruse, Hagen; Ohnsorge, Franziska; Tourek, Gabriel; Xie, Zoe Leiyu
    This paper examines tax revenue shortfalls in South Asian countries. On average during 2019–23, South Asian revenues totaled 18 percent of GDP—well below the average 24 percent among emerging market and developing economies (EMDEs). Econometric estimates from stochastic frontier analysis, which control for tax rates and the size of potential tax bases, suggest that tax revenues in the region are 1 to 7 percentage points of GDP below potential, with shortfalls in five of the region’s eight countries larger than in the average EMDE. Even after controlling for country characteristics, such as widespread informal economic activity outside the tax net and large agriculture sectors, sizable tax gaps remain, suggesting the need for improved tax policy and administration. The paper discusses and provides evidence from international experience with reforms to raise government revenues.
Journal
Journal Volume
Journal Issue

Related items

Showing items related by metadata.

  • Publication
    Productivity in the Time of COVID-19
    (World Bank, Washington, DC, 2021-04-26) De Nicola, Francesca; Timmis, Jonathan; Tran, Trang Thu; Mattoo, Aaditya
    Firms in the East Asia and Pacific (EAP) region have been hit hard by the COVID-19 (coronavirus) pandemic, with dramatic and widespread falls in sales and employment. Firm sales in some EAP countries were 38 to 58 percent lower in April or May 2020, compared to the same month in the previous year. Small and medium-sized enterprises (SMEs) have been particularly affected. The pandemic will have a lasting impact on productivity growth as firm indebtedness and increased uncertainty inhibit investment, and firm closures and unemployment lead to a loss of valuable intangible assets. Support for firms is needed but must be based as far as possible on objective criteria, related not only to past performance or current pain but to the potential for firms, including new firms, to thrive in the future. To avoid unduly prolonging assistance, governments should build exit strategies into the design of support measures and commit to phasing support out by linking it to observable macroeconomic indicators of recovery.
  • Publication
    The Trade-Reducing Effects of Restrictions on Liner Shipping
    (World Bank, Washington, DC, 2014-06) Bertho, Fabien; Borchert, Ingo; Mattoo, Aaditya
    This paper examines how policy governing the liner shipping sector affects maritime transport costs and seaborne trade flows. The paper uses a novel data set and finds that restrictions, particularly on foreign investment, increase maritime transport costs, strongly but unevenly. The cost-inflating effect ranges from 24 to 50 percent and trade on some routes may be inhibited altogether. Distance increases maritime transport costs, but also attenuates the cost impact of policy barriers. Overall, policy restrictions may lower trade flows on specific routes by up to 46 percent and therefore deserve greater attention in national reform programs and international trade negotiations.
  • Publication
    Do Capital Incentives Distort Technology Diffusion? Evidence on Cloud, Big Data and AI
    (Washington, DC: World Bank, 2024-09-19) DeStefano, Timothy; Johnstone, Nick; Kneller, Richard; Timmis, Jonathan
    The arrival of cloud computing provides firms a new way to access digital technologies as digital services. Yet, capital incentive policies present in every OECD country are still targeted towards investments in information technology (IT) capital. If cloud services are partial substitutes for IT investments, the presence of capital incentive policies by unintentionally discourage the adoption of cloud and technologies that rely on the cloud, such as artificial intelligence (AI) and big data analytics. This paper exploits a tax incentive in the UK for capital investment as a quasi-natural experiment to examine the impact on firm adoption of loud computing, big data analytics and AI. The empirical results find that the policy increased investment in IT capital as would be expected; but it slowed firm adoption of cloud, big data and AI. Matched employer-employee data shows that the policy also led firms to reduce their demand for workers that perform data analytics, but not other types of workers
  • Publication
    Bank Ownership and Firm Innovation
    (World Bank, Washington, DC, 2023-06-20) De Nicola, Francesca; Iootty, Mariana; Melecky, Martin
    This paper studies the effect of bank ownership on product innovation by borrowing firms, highlighting the role of the state, foreign, and combined foreign-state bank ownership. It uses Enterprise Survey data for more than 22,000 firms in 49 countries from 2016 to 2020, linked to Fitchconnect data on banks: their ownership, soundness indicators, and legal origins. The paper confirms that a firm's access to bank credit is associated with a greater probability of product innovation, even when adjusting for possible reverse causality. If the credit is provided by a state-owned bank, the probability that the borrowing firm will innovate increases. The analysis does not find a similarly positive effect for foreign bank ownership. But when considering the combined effect of foreign state ownership, the results are most statistically and economically significant. Although the results may not be extendable to research and development spending (a key input to innovation), the findings show that foreign state banks can serve as an additional financing vehicle to stimulate radical innovation alongside equity financiers.
  • Publication
    Financial Structure and Firm Innovation
    (World Bank, Washington, DC, 2021-05) de Nicola, Francesca; Miguel, Faruk; Mare, Davide S.
    This paper analyzes the relationship between financial structure and innovation. Analysis of cross-country micro data over 2009–18 shows that a firm’s financial sources matter for the choice to innovate and the extent to which a firm innovates. The relationship is stronger for firms relying on non-bank financial intermediaries and for firms in low-technology sectors. Moreover, the use of external sources of finance is associated with improved prospects of innovation, especially in more financially developed countries. These findings suggest that developing the financial sector can bring benefits in terms of innovation.

Users also downloaded

Showing related downloaded files

  • Publication
    Indonesia : Oil and Gas Sector Study
    (Washington, DC, 2000-06) World Bank
    This study attempts to provide a broad, first cut review of the most pressing issues facing the sector, and to recommend ways to ameliorate or eliminate the problems. The main problems are: 1) petroleum product prices are heavily subsidized at the aggregate level and distorted at relative levels, and thus need to be rationalized within an economic framework; 2) the functions and role of the state oil and gas company (Pertamina) are problematic, and therefore Pertamina must be fundamentally restructured to eliminate the conflicts of interest and inefficiencies; 3) some of the provisions of the production sharing contracts are relatively regressive and need to be re-evaluated with a view to maximize the contribution of the sector to the economy, and to increase upstream investment by the private sector; 4) existing laws and regulations are inadequate and must be replaced; 5) petroleum products are of poor quality and must be improved, particularly by phasing out the lead from gasoline; and 6) energy sector institutions are weak and must be strengthened. Although the issues are complex and sweeping changes are needed, given the current political climate, this is an opportune time for Indonesia to begin the process. As a first step, preparing an official and comprehensive declaration of government policy for the hydrocarbon sector is critically important--needed are the vision for the sector, policy objectives, and policy actions required to solve the sector's problems.
  • Publication
    Strategic Planning for Poverty Reduction in Vietnam : Progress and Challenges for Meeting the Localized Millennium Development Goals
    (World Bank, Washington, DC, 2003-01) Swinkels, Rob; Turk, Carrie
    This paper discusses the progress that Vietnam has made toward meeting a core set of development goals that the government recently adopted as part of its Comprehensive Poverty Reduction and Growth Strategy (CPRGS). These goals are strongly related to the Millennium Development Goals (MDGs), but are adapted and expanded to reflect Vietnam's national challenges and the government's ambitious development plans. For each Vietnam Development Goal, the authors describe recent trends in relation to the trajectories implied by the MDGs, outline the intermediate targets identified by the government, and discuss the challenges involved in meeting these. Relative to other countries of similar per capita expenditures, Vietnam has made rapid progress in a number of key areas. Poverty has halved over the 1990s, enrollment rates in primary education have risen to 91 percent (although there is a quality problem), indicators of gender equity have been strengthened, child mortality has been reduced, maternal health has improved, and real progress has been made in combating malaria and other communicable diseases. In contrast, Vietnam scores worse than other comparable countries in the areas of child malnutrition, access to clean water, and combating HIV/AIDS. A number of important crosscutting issues emerge from this analysis that need to be addressed. One such challenge is improving equity, both in terms of ensuring that the benefits of growth are distributed evenly across the population and in terms of access to public services. This will involve addressing the affordability of education and curative health care for poor households. Improvements in public expenditure planning are needed to align resources better to stated desired outcomes and to link nationally-defined targets to subnational planning and budgeting processes. There is also a need to address capacity and data gaps which will be crucial for effective monitoring.
  • Publication
    Kingdom of Morocco : Poverty Update, Volume 1. Main Report
    (Washington, DC, 2001-03-30) World Bank
    According to the 1998-99 Living Standards Measurement Survey conducted in Moroocco, poverty showed a disturbing increase during the 1990s, regardless of how poverty is measured. This report updates the poverty profile for Morocco following the comprehensive approach suggested by the latest World Development Report (see report no. 20888 for an overview of this report). It presents a detailed analysis of 1) Poverty trends in the 1990s (Chapter 2), 2) which factors are key in explaining the observed increase in poverty (Chapter 3), and 3) the support given to the poor by Government intervention (Chapter 4). An overview of the main initiatives taken by the authorities as well as by nongovernmental organizations and private businesses in the late 1990s is presented in the first chapter; their effects, though not captured by the 1998/99 data, are likely to have a significant impact on poverty reduction in the coming years.
  • Publication
    Improving Access to Medicines in Developing Countries : Application of New Institutional Economics to the Analysis of Manufacturing and Distribution Issues
    (World Bank, Washington, DC, 2005-03) Attridge, C. James; Preker, Alexander S.
    This paper examines alternative frameworks for empirical analysis of supply side activities, namely, the manufacture and distribution of medicine, through the application of New Institutional Economics (NIE) concepts. Attention is focused particularly upon the potential utility of ideas from agency theory, transaction cost analysis and contemporary ideas from strategy theory. The major purpose of this paper is to use these theoretical frameworks to provide insight for policy makers, when faced with specific situations, whether in an international agency, or a private company, or in defining a national strategy. The analysis attempts to show the importance of distinctions between ideas of 'make' or 'buy', between 'national self sufficiency' and 'international purchasing' strategies, the limitations of contractual agreements under market governance and the crucial linkages between strategy formulation, strategy implementation and the necessary capabilities to achieve successful performance in practice. The current international situation on the investment, location and capacity of pharmaceutical manufacturing is reviewed and likely future scenarios suggested. Correspondingly current patterns of trade in medicines and their likely development within the context of the WTO and bilateral trade agreements are discussed. Against this background the promise and the pitfalls for new forms of public-private partnerships, which may offer attractive alternatives to conventional structures are evaluated. The implications of alternative future strategic options for national governments in setting the balance between health and industrial policies are examined and in particular the extent to which a national manufacturing capability should be developed or sustained. Similarly the scope for improving low cost distribution systems for medicines, based upon a mix of public and private sector channels, is assessed. We conclude with suggestions for further development of a transaction-based framework.
  • Publication
    Case Study 2 - Andhra Pradesh, India : Participation in Macroeconomic Policy Making and Reform
    (Washington, DC, 2003-03) World Bank
    For the past six years, the State of Andhra Pradesh in India has been at the vanguard of efforts to modernize the economy and the state while pursuing policies to improve the lives of the poorest. The Chief Minister and head of the ruling Telugu Desam Party (TDP), Mr. Chandra Babu Naidu, is known by some as the "Laptop Minister" for his modernizing initiatives. He has reached out to international organizations and investors but has also maintained his base of support at home, in part through expanded programs in education, health, and rural development. "I have initiated so many things," Naidu said. "They are going on and will pay off after some time. But people need something today." The challenges facing the government are daunting. Andhra Pradesh (AP) is one of the largest and poorest states in India. Its population of almost 80 million approaches that of the Philippines, the 13th most populous country in the world. Even as its high-tech industries develop rapidly, AP's overall literacy rate remains a modest 44% and one-third of the population lives in poverty.