Crowding in or crowding out? The effect of imported environmentally sound technologies on indigenous green innovation

Abstract

International trade is considered an important conduit for disseminating environmentally sound technologies (ESTs), but there is limited evidence of how trade in ESTs affects domestic firms' green innovation, particularly for importers. To close this knowledge gap, we first develop a basic model to conceptually examine how imported ESTs impact enterprises' performance in green innovation. Then, by creating a distinct combined database of firm-level trade and patent data from 2000 to 2016, we give empirical evidence. Our empirical results demonstrate a significant crowding-out effect of imported ESTs on green innovation, whereas technological proximity, learning capacity, and government subsidies can help to lessen this adverse effect. Furthermore, imported ESTs of peer firms in the same industry or imported ESTs of downstream industries have beneficial spillover effects on a focal firm's green innovation. Our study offers fresh perspectives on the current status and potential future of liberalizing trade in ESTs, as well as on the sources of green innovation.

Keywords: Environmentally sound technologies; Green innovation; Imports.