The Transmission of Sectoral Shocks Across the Innovation Network

Max Planck Institute for Innovation & Competition Research Paper No. 23-08

CEPR Press Discussion Paper No. 17960

CRC TRR 190 Discussion Paper No. 229

44 Pages Posted: 10 Mar 2023

See all articles by Christian Fons-Rosen

Christian Fons-Rosen

University of California, Merced

Zhaoxin Pu

Max Planck Institute for Innovation and Competition

Date Written: March 6, 2023

Abstract

We use a firm-level panel of 13 European countries to assess how a sector-specific shock propagates through technological linkages across innovating firms in the rest of the economy. We find that the competition shock to the European textile sector, induced by the 2001 removal of import quotas on Chinese textiles, had a strong negative effect on non-textile firms’ patenting and knowledge sourcing. These firms end up diversifying their patenting across more technological categories and start citing more (geographically and technologically) distant sources of knowledge. When aggregating data at the country level, the negative indirect effect on patenting of non-textile firms can be 3 to 5 times as large as the positive direct effect on textile firms.

Keywords: technological linkages, spillovers, patents, industrial policy

JEL Classification: D57, L25, L60, O33, O38

Suggested Citation

Fons-Rosen, Christian and Pu, Zhaoxin, The Transmission of Sectoral Shocks Across the Innovation Network (March 6, 2023). Max Planck Institute for Innovation & Competition Research Paper No. 23-08, CEPR Press Discussion Paper No. 17960, CRC TRR 190 Discussion Paper No. 229, Available at SSRN: https://ssrn.com/abstract=4382120 or http://dx.doi.org/10.2139/ssrn.4382120

Christian Fons-Rosen (Contact Author)

University of California, Merced ( email )

P.O. Box 2039
Merced, CA 95344
United States

Zhaoxin Pu

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

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