The “International Trade Research Trend” section aims to release the latest research findings in the field of international trade published in authoritative Chinese journals such as “Social Sciences in China,” “Economic Research Journal,” “Journal of Management World,” “China Economic Quarterly,” and “The Journal of World Economy.” It strives to provide everyone with timely, accurate, and high-quality front-line dynamics in the field of international trade.

Economic Research Journal

China ’s Innovation Mode Choice: Independent Innovation orTechnology Introduction?

TAN Yong, QIU Bin, YE Di   and QI Jianhong

Summary: Innovation serves as the core of economic development, which shapes micro-firm-level competitiveness and macro-  country-level comparative  advantages. Although  a  large body  of literature  examines the  impact of innovation  on  firm perfor ‐  mance through TFP improvement, the impact of innovation mode choices on firm performance has rarely been investigated. In this paper, we  attempt to  first analyze the impact of innovation mode  choices on  firm performance, and then  disentangle the demand and  supply channels through which different innovation modes affect firm performance.  Supply channel refers to the facilitating effect of innovation on firm performance by improving firm TFP; demand channel refers to the signaling effect of innovation, which increases firms ’ demand in a market and hence improves firm performance. The clarification of the hetero ‐ geneous channels through which different innovation modes affect firms ’ export profits is not only the focus of research inter ‐  est, but also holds practical significance.

We start this paper by establishing a series of stylized facts to highlight the signaling effect (demand channel) of in ‐ troducing foreign technology ; and the productivity improvement channel (supply channel) of independent innovation. In particular, we first present stylized facts to show the correlation between firms ’ innovation mode choices and export per ‐ formance, and find a positive correlation between firm exports and introducing foreign technology. We exclude the possi ‐ bility that exports encourage firms ’ foreign technology introduction by elucidating phenomena such as the negative corre ‐ lation between firms ’ foreign technology introduction and the duration of their engagement in export activities, as well as highlighting the greater motivation  of domestic enterprises vis-à -vis foreign-invested counterparts to introduce  foreign technology. Second, we highlight the signaling effect of introducing foreign technology through showing an additional ex ‐ port enhancement effect of introducing foreign technology after controlling for the TFP improvement effect. Third, we un ‐ cover the heterogeneous TFP improvement effects of introducing foreign technology and independent innovation. The re ‐ sults show that independent innovation generates a more pronounced TFP improvement effect than introducing foreign technology does . In addition, independent innovation may fuel industrial/national standard setting. Last, we uncover the differential costs associated with different innovation modes by showing the difference of absorbing and technology up ‐ grading costs . All these stylized facts together imply that different innovation modes influence firm performance through differential channels and the magnitude manifests significant heterogeneity. When export revenues account for a larger share in firms ’ total revenues, the firms tend to introduce foreign technology ; otherwise, they will be more likely to en ‐ gage in independent innovation.

Based  on  these  stylized  facts,  we  develop  a  structural  model,  in  which  firms  sequentially  determine  their  innovation modes, R&D investment, and optimal price/quantity, and make export decisions. The structural model is numerically calibrated by matching certain moment conditions from the data, and the key parameters, e.g., the signaling effect and TFP improvement effect, have been identified. We further conduct counterfactual analyses. For example, we change the international and domes ‐ tic trade  costs to  simulate the relative importance  of international and  domestic markets, and  examine the  optimal innovation mode choice under these counterfactual situations. The results show that when the international market becomes tougher, inde ‐ pendent innovation is a more appropriate choice for firms. In addition, if all firms adopt independent innovation, the overall in ‐ novation rate is likely to increase, offsetting the negative impact caused by a reduction in the foreign market size.

Our  analysis  provides  insightful  support  for  independent  innovation:  the  domestic  market  has  gained  increased  signifi ‐ cance in response to the implementation of the “ dual-circulation system, ”while the international market has become more un ‐ predictable. As such, independent innovation can improve firm TFP effectively, and alleviate the “ containment ”issue faced by key technologies.

Key words:  Innovation  Mode  Choice;  Independent  Innovation;  Foreign  Technology  Introduction;  Signaling  Effect;  Structural Estimate

JEL Classification: D33, J23, O57

Economic Research Journal

High-standard Trade Agreements and Global Supply Chain Resilience: The Perspective of Institutional Environment

SHEN Guobing,  and SHEN Binchao

Summary: Currently, the global economic recovery remains fragile, with frequent international economic and trade fric ‐ tions, escalating geopolitical conflicts, increased uncertainty, and the US push for supply chain reshaping leading to the fragmentation of the global economy and trade . These factors pose a significant challenge to the resilience of global sup ‐ ply chains . The pressing question is: how to effectively improve the resilience level of global supply chains? This paper examines whether high-standard trade agreements can become a viable solution to managing global supply chain risks, considering  China’s  implementation  of the  strategy  of free  trade  areas . The paper, based  on  institutional  environment channels, explores the impact of high-standard trade agreements on global supply chain resilience (GSCR), which con ‐ sists of six sections . It starts with an introduction, and followed by an analysis of stylized facts . Section 3 constructs a theoretical model to elucidate the influence of the institutional environment on supply chain resilience . Section 4 assesses the  impact of high-standard trade  agreements  on the  institutional environment through  structural estimation.  Section  5 uses quantitative analysis to examine the effect of high-standard trade agreements on GSCR through the institutional envi ‐ ronment, and Section 6 concludes with policy implications . In the analysis of stylized facts, we employ survival analysis, linear models, and causal analysis to  examine the effect of trade agreement depth  on  GSCR. Theoretical modeling in ‐ volves constructing a dynamic contract model illustrating the relationship between institutional environment and supply chain resilience . Structural estimation and quantitative analysis entail developing a likelihood function, employing Bayes ‐ ian estimation to determine structural parameters, and quantitatively assessing the impact of high-standard trade agree ‐ ments on GSCR by using China as a case study. The main data utilized in this study are sourced from the global bilateral HS1996 6-digit intermediate products trade data from 1996 to 2020 in the CEPII BACI database, and the trade agreement depth data from 1996 to 2015 in the global trade agreement depth database established by Hofmann et al. (2017) .

The main findings of this study are threefold. Firstly, the stylized facts indicate that the increase in the depth of trade agreements can reduce the risk of disruptions in global supply chain transaction relationships and improve resilience . Sec ‐ ondly, the theoretical model indicates that under supply chain shocks, an improvement in the institutional environment, i. e ., an increase in contract coverage rate, whether under spot or relational contracts, can decrease the probability of supply chain  transaction  relationship  disruptions  and  enhance  resilience .  Moreover,  firms  utilizing  relational  contracts  prove greater resilience in the supply chain than those relying on spot contracts . Thirdly, structural estimation and quantitative analysis confirm that the increase in the depth of trade agreements can improve the institutional environment, decrease the probability of global supply chain disruptions, and enhance resilience . The implementation of the Regional Comprehen ‐ sive Economic Partnership (RCEP) and the accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will reduce the probability of China’s import supply chain disruptions from member countries, sig ‐ nificantly amplifying China’s GSCR compared to the existing trade agreements . Based on this, effective measures to en ‐ hance  China’s  supply  chain  resilience  will be  actively  signing  and  implementing  high-standard  trade  agreements  and building a first-class business system environment.

The contribution of this paper lies in the three extensions to Antràs ’ (2023) model. Firstly, it incorporates the institu ‐ tional environment into a dynamic contract model. Unlike Defever et al. (2016) and Kukharskyy (2016) who assume com ‐ plete contract incompleteness, our model introduces varying levels of the institutional environment through partial con ‐ tract incompleteness and uses contract coverage rate to measure the level of the institutional environment, which is a mar ‐ ginal improvement. Secondly, it incorporates stochastic supply chain shocks and analyzes supply chain disruptions . Dif‐ fering from Naghavi et al. (2023) who directly utilize the value of static contracts as a proxy for relationship duration, we employ a dynamic discrete choice model to obtain the endogenous contract termination probabilities . Thirdly, it incorpo ‐ rates contract mode selection. Firms choose between spot and relational contracts . So, the institutional environment will influence supply chain resilience differently as firms ’ choice differs . This enriches the supply chain mechanisms . Finally, it conducts a quantitative analysis of the impacts of China’s implementation of RCEP and accession to CPTPP on enhanc ‐ ing its GSCR.

Key words: High-standard Trade Agreements; Institutional Environment; Trade Agreement Depth;  Supply Chain Resil ‐ ience

JEL Classification: F13, L23, D23

Economic Research Journal

Industrial Digitalization and Domestic Circulation

ZHANG Hongsheng, DU Yutong,  and ZHANG Xiaolong

Summary: The new development paradigm with domestic circulation as the mainstay and domestic and overseas circula ‐ tions reinforcing each other represents a significant decision made by the Central Committee of the Communist Party of China  with  Xi  Jinping  as  its  core .  This  decision  is  made  based  on  the  stage  of China’s  development,  environmental changes, and prevailing conditions . A robust and reliable domestic circulation is the cornerstone ensuring the stability and sustained development of China’s economy amidst a complex external environment. It is also crucial to promote steady economic growth and achieve high-quality development in China . In the context of accelerated reform of the new genera ‐ tion of information technology and rapid integration of the digital economy with the real economy, this paper, from the perspective of industrial digitalization, explores whether industrial digitalization can enhance the resilience and reliability of the domestic economic circulation by improving supply quality and expanding domestic demand, thus providing theo ‐ retical references and policy suggestions for accelerating the establishment of the new development paradigm.

Based on large multinational industry panel data covering 43 economies and 56 industries from 2000 to 2014, com ‐ piled  from  world  input-output  tables,  this paper  calculates, by  using  the  input-output method,  industrial  digitalization level and domestic economic circulation indicator both at the national-industry level. The study finds that China’s second ‐ ary  industry  has  a  high  level  of digitalization,  while  the  tertiary  industry  lags  behind  the  major  developed  countries . China’s primary industry has a good domestic circulation degree, but there is room for improvement in the final product link  of the  secondary  industry  and  domestic  circulation  of the tertiary  industry. Enhancing  domestic  demand  and  final product quality is key to boosting the endogenous dynamics of domestic circulation. On both supply and demand sides, in ‐ dustrial digitalization can facilitate domestic circulation by improving total factor productivity, intermediate goods qual ‐ ity, and average wage levels, thereby enhancing the resilience and reliability of domestic circulation. In terms of heteroge ‐ neity,  the  impact  of industrial  digitalization  on  domestic  circulation  is  more  pronounced  in  the  primary  industry.  For China, the improvement in the level of industrial digitalization can not only enhance the endogenous dynamics of domes ‐ tic circulation but also help improve China’s self-sufficiency rate of core technologies and break through core technologi ‐ cal bottlenecks, thus achieving economic self-reliance and strength.

The possible marginal contributions of this paper are as follows . Firstly, from the perspective of research, there is a lack of quantitative studies on the new development paradigm , particularly concerning its promotion through industrial digitalization. This paper is the first to focus on the theoretical and empirical relationship between industrial digitalization and domestic circulation, enriching the research related to digital transformation and the new development paradigm. Sec ‐ ondly, it quantitatively compares China and major developed countries in terms of the industrial digitalization level and domestic circulation level, and sets out related typical facts, providing references for understanding the global position of China’s industrial digitalization and domestic circulation. Thirdly, in terms of theoretical mechanisms, it explores the im ‐ pact of industrial digitalization on domestic circulation through three channels, namely productivity, intermediate goods quality, and income . Lastly, in terms of policy implications, on the demand side, the future focus of domestic circulation should be on steadily increasing the disposable income of residents, expanding domestic demand, and strengthening the demand for domestic final and intermediate goods ; on the supply side, a high-quality domestic supply system should be built to improve the quality of domestic products and services, with a more flexible and efficient supply system to meet the upgrading domestic needs . In addition, it highlights the critical role of digital transformation in enhancing domestic demand and improving the supply system , with industrial digitalization supporting the mutual reinforcement of domestic and international circulations .

Key words: Industrial Digitalization; Domestic Circulation; Intermediate Product Supply; Self-sufficiency Rate of Core Technologies

JEL Classification: F15, O11, L86

Journal of Management World

Digital Technology Application and Enterprises' Export Performance:Evidence from the Zhongguancun National Innovation Demonstration Zone's Enterprises

Cai Hongbo   and Han Jinrong

Summary:  Accelerating  the  digital  empowerment  of  the  entire  trade  is  an  important  component  of  China's  ef⁃ forts to build a new system of high-level open economy. To promote high-quality development of foreign trade in the current  new  stage  of  development,  it  is  necessary  to  expand  new  drivers.  As  the  digital  economy  gradually  becomes the key to reshaping the global economic structure and changing the competitive landscape, how should we effectively leverage the critical role of digital technology to empower export trade growth? To answer this question, this article in ⁃ vestigates  the  impact  and  mechanism  of  digital  technology  application  on  enterprises'  export  growth  and  upgrade based on data of the Zhongguancun National Innovation Demonstration Zone from 2014 to 2019.

This  article  draws  four  main  conclusions.  Firstly,  the  application  of  digital  technology  has  a  significant  positive impact on firms' export probability, total export value, export value of high-tech products, and the proportion of high- tech  product  exports.  Secondly,  digital  technology  application  enhances  firms'  export  performance  through  two  chan ⁃ nels. On the one hand, digital technology mainly promotes firms' R&D investment and innovation output, thereby driv ⁃ ing the growth and upgrading of export trade; on the other hand, digital technology also leads to the optimization of la ⁃ bor skill  structure within firms, thereby  improving production efficiency  and having a positive effect on export trade. Thirdly,  heterogeneity  analysis  finds  that  digital  technologies  at  the  underlying  technological  level,  such  as  big  data and cloud computing, have a particularly  significant impact on the export of firms' high-tech products, while digital technologies at the application level, represented by e-commerce, have a more pronounced effect on firms' total ex ⁃ port.  In  addition, the  export  growth  and  upgrading  effects  of digital  technology  are  mainly  reflected  in  private  enter ⁃ prises  and  large  and  medium-sized  enterprises.  Fourthly,  further  discussing  the  linkage  between  the  above  relation ⁃ ships and China's policies, it is concluded that the policy of additional deductions for enterprise R&D expenses can further amplify the role of digital technology in promoting export trade.

Compared with  existing  research,  the  marginal  contribution  of  this  article  mainly  lies  in  the  following  three  as ⁃ pects. Firstly, existing literature mainly extracts digital-related word frequencies from the annual reports of listed com ⁃ panies  to  construct  indicators  of  digital  transformation,  but  there  is  a  large  measurement  bias,  making  it  difficult  to truly reflect the degree of digital transformation of enterprises. This article overcomes this problem and can accurately identify  which  digital  technologies  companies  have  truly  adopted.  Secondly,  although  existing  literature  has  studied the impact of digitalization on export scale, export product quality, export resilience, etc., most of them only focus on one  aspect  of  enterprise  exports,  lacking  systematic  examination  of  enterprise  export  performance.  This  article  con ⁃ structs  multiple  dimensions  of  enterprise  export  growth  and  export  upgrading  indicators,  comprehensively  examines the progressive process of digital technology application promoting enterprise exports. Thirdly, this article attempts to study the impact of emerging technologies in the digital economy era on enterprise export performance from the per ⁃ spective of technological change, and explores two channels: reshaping internal technological paradigms and optimiz ⁃ ing employment skill structures that are matched with them. In addition, this article also conducts an extended analy ⁃ sis on the linkage between national innovation-oriented tax reduction policies and the development of the digital econ ⁃ omy and provides empirical evidence for the first time.

Key words: digital technology application; export growth; export upgrading; export of high-tech products

JEL Classification: F10, F16, O32

The Journal of World Economy

Digital-Substantive Integration and Optimization of Export Product Strategies for Firms: Based on the Perspective of Flexible Production

Jiang Wei; Ni Shicheng; Peng Miao

Abstract: This paper constructs a model of multi-product heterogeneous firms that includes digital firms and investigates the theoretical mechanism of digital firms that empowers multi-product firms to optimise their export product strategies from a flexible production perspective. Using Chinese firm-level data from between 2000 and 2016, it develops an econometric model to examine the effect and mechanism of digital proximity on the export product scope and skewness of Chinese manufacturing firms. The results of the study indicate that increasing digital proximity not only helps to expand the export product scope,  but  also   significantly  improves  their  export   skewness,  which  enhances  intra-firm  resource

allocation and enriches their export product scope, thus achieving the joint improvement of Chinese firms ’ export product strategies in terms of efficiency and diversity. The analysis of the mechanism also reveals  that digital proximity not only directly improves the flexible production capacity of manufacturing firms  through the flexible production effect, but also indirectly increases the degree of market competition,  ultimately driving the optimisation of export product strategies for manufacturing firms.

Key words: digital-substantive integration, export product strategies, intra-firm resource allocation, flexible production, market competition

JEL codes: F12, F14, O14