The assessment of globalization on innovation in Chinese manufacturing firms

This paper investigates the effect of globalization on innovation by using a combined dataset of 596809 Chinese manufacturing firms with 1,993,154 observations and provincial globalization indices from 1998 to 2009. The empirical findings suggest that overall provincial globalization is associated with better innovation performance for Chinese firms. More specifically, economic, social, and political globalization, present positive impacts on technological innovation. Interestingly, through subsample analysis the findings indicate that globalization expresses a distinct relationship with firms’ innovation performance. In particular, economic globalization correlates to greater technological innovation in private-owned enterprise, a lower one in stated-owned enterprises, and an insignificant one in foreign-owned enterprises. Moreover, a subsample analysis for different industries exhibits similar results as in the full sample except for the resources-intensive industry in which economic globalization is associated with lower innovation. Our findings indicate that China should continue to enhance connections in the economic, social, and political dimensions with other countries.