Department of Economics
University of Maryland
College Park, MD 20742

Graduate Program:

Undergraduate Program:


Defensive Innovation and Firm Growth in the U.S.: Impact of International Trade (Job Market Paper) [PDF]

I develop a two-country endogenous growth model to show that increasing foreign competition contributes to the recent decline in high-growth firm activities and startup rates in the U.S. by changing the way how firms allocate their innovative effort. Firms improve their existing products through internal innovation, while developing new products through external innovation. A novel friction I consider is that it takes time to learn others' technology, which I denote as an imperfect technology spillover. This friction allows firms to defend themselves from competitors by building technological barriers through internal innovation. Increasing foreign competition induces innovation-intensive and thus fast-growing firms to invest more in internal innovation for defensive reasons. At the same time, foreign competition discourages all firms from undertaking external innovation. This shift in innovation cuts the employment growth of innovation-intensive firms, as external innovation generates more quality improvement than internal innovation and requires firms to hire a new set of workers to produce new products. Entry for potential startups is harder as incumbents build higher technological barriers. By using firm-level data from the U.S. Census Bureau integrated with firm-level patent data, I confirm the model's predictions.

Presented at: Global Entrepreneurship and Innovation Research Conference Poster Session (Washington DC, 2019), Midwest Macroeconomics Meeting (Athens, 2019), WEAI Graduate Student Workshop (San Francisco, 2019)

Separate links for: Technical Appendix

Trade Induced Technological Change in the U.S.: The Rise of Software and Labor Substituting Technology

Work in Progress

This project studies the rise of the software industry due to international trade as a channel that induces technological change in the U.S. economy. Software is used as production inputs for skilled-labor and innovation inputs for automating production technology for unskilled-labor. Because the U.S. has a comparative advantage in producing software, globalization increases foreign demand for software made by U.S. firms, and this incentivizes innovation in the software industry. Then, due to the increasing returns to scale nature of software production, the price for software drops, and demand for software accelerates. The surge of demand further motivates innovation in the software industry, and in turn, more production processes previously done by unskilled-labor are automated.

The Effects of Offshoring on Firm Entry and Growth

with Joonkyu Choi, and Chen Yeh, work in progress