Reports
Discussion Papers
No.950 Technology Sanction and Firm R&D: Evidence From the US-China Trade Dispute
by Kazunobu Hayakawa, Chih-hai Yang
January 2025
ABSTRACT
The United States has implemented export control regulations targeting China. Specifically, it has included numerous Chinese companies on the Entity List, which comprises parties of concern. Exporters of regulated items or technology to these listed firms must secure permission from the US government, with the possibility of denial. This study investigates how this technology sanction hinders the R&D activities of sanctioned Chinese firms. To achieve this, we apply the matching method to firm-level data from 2015 to 2022. Our findings indicate that technology sanctions do not increase the R&D investment and R&D intensity, even though the total assets of sanctioned firms decline. When we separate the listed firms based on the license review policy (i.e., the nearly strict review), we again observe insignificant effects on R&D investment in either category of sanctioned firms. Notably, less strictly sanctioned firms accumulated more inventories, whereas more strictly sanctioned firms received increased financial support from the government in response to the technology sanctions.
Keywords: US–China trade war, Technology sanction, Innovation
JEL classification: F15, F53
PDF available at https://hdl.handle.net/2344/0002001241
Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.