The innovation Dilemma: Unpacking the impact of China's expanded import policies on innovation of manufacturing enterprises

Drawing on data from the China Industrial Enterprise Database, Customs Import and Export Trade Database, and the China Intellectual Property Office Patent Database, this study examines the impact and mechanisms through which China's expanded import policies influence innovation in manufacturing enterprises. The results suggest that: (1) The expansion of import policies generally exerts a significant inhibitory effect on innovation within manufacturing enterprises, though this effect varies based on enterprise characteristics. Specifically, the inhibitory effect is pronounced for utility model patents and design patents but negligible for invention patents. The effect is also more significant in capital- and technology-intensive industries, while labor-intensive enterprises show little to no impact. Additionally, regional proximity to overseas markets negatively influences innovation in regions with higher market proximity, whereas no such effect is observed in regions with lower proximity. Lastly, the policy has a positive impact on innovation in state-owned enterprises but a significant negative effect in foreign-funded enterprises. (2) The primary drivers of the inhibitory impact on innovation are the import competition and lock-in effects associated with expanded imports. Thus, to optimize the effects of its import expansion strategy, China should not only focus on importing key core technology products but also invest in strengthening its domestic innovation capabilities, avoiding potential constraints on economic and industrial development.