U.S.-China Innovation Competition

We examine how foreign information access affects competition in innovation. We construct measures of Chinese information-gathering capacity based on industry geography and internet penetration. They predict actual Chinese-user downloads of U.S. firm filings. Increases in Chinese information access are followed by lower U.S. firm R&D, patent values, and patent grants. Chinese firms increase patenting in the same technology areas and cite more affected U.S. firms’ prior patents. The effects are stronger in more contested markets and in industries receiving Chinese government support. Placebo tests do not produce similar results. The evidence is consistent with Chinese innovation competition reducing U.S. innovation.