exports: a horizontal shock affecting firms selling goods that compete with similar imported Chinese goods, and a vertical …. Moreover, this negative impact is concentrated on low-productivity firms. By contrast, we find a positive effect - although …

export market. This in turn reduces profits and therefore innovation incentives particularly for firms with low productivity …. Overall the positive impact of the export shock on innovation is magnified for high productivity firms, whereas it may … negatively affect innovation in low productivity firms. We test this prediction with patent, customs and production data covering …

contemporaneous sales and employment for all firms, without any notable differences between high and low productivity firms. We show … innovation rents; yet by inducing more entry and thus more competition, it also discourages innovation by low productivity firms …