Creative Destruction,New Varieties,or Improvement of Existing Products?Innovation Accounting of Chinese Exporting Enterprises

¹Yan Ping:School of Public Finance and Taxation, Zhongnan University of Economics and Law

²Yin Ge:Institute of International Economy, University of International Business and Economics

³Yuan Xilin:Department of Economics, Yale University

⁴Yu Miaojie:Liaoning University

Published:Aug.2022

Abstract：The contribution of innovation to total factor productivity (TFP) can be achieved through creative destruction and development of new varieties by new entrant enterprises and incumbent enterprises, and improvement of existing products by incumbent enterprises. In this paper, we examine the relative importance of the above three innovation channels which are not studied by existing literature. We construct a mapping between different channels and changes in the number of employees, and use the method of simulated moments to calibrate the parameters of the structural model, so as to infer the contribution of different innovation channels to TFP through employment data. Our results show that more than 60% of TFP growth comes from improvement of existing products by incumbents. However, the contribution of new entrants to TFP growth increased from 17.76% during 1998—2001 to 32.98% during 2002—2007, suggesting that the role of new entrants in innovation has become more and more important. Moreover, we find that new exporters contribute much more to the growth of TFP through the development of new varieties than new non-exporters; compared with exporters, non-exporters contribute to the growth of TFP more through creative destruction.

  Keywords：product quality, exporters, innovation