Chong Liu and Zi Wang†
Shanghai University of Finance and Economics
We propose a quantififiable general equilibrium model with trade and fifirm innovation
in which knowledge diffffuses across domestic fifirms via a highly selective network. Our
theory suggests that in the presence of inter-fifirm knowledge networks, non-exporting
fifirms can benefifit indirectly from export liberalization by learning from exporting fifirms.
We estimate the structure of inter-fifirm knowledge networks using the unique dataset on
patent citations across Chinese manufacturing fifirms. Simulations of our model suggest
that inter-fifirm knowledge networks account for about one third of the increase in the
Chinese real income induced by trade liberalization over 2001-2006.
Keywords: Trade Liberalization; Firm Innovation; Knowledge Diffffusion.
JEL classifification: O11 ; O33 ; O38 ; F62.
Export and Innovation: The Role of Inter-Firm Knowledge Networks.pdf