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Quid Pro Quo, Knowledge Spillovers, and Industrial Quality Upgrading: Evidence from the Chinese Auto Industry

Jie Bai, Panle Jia Barwick, Shengmao Cao, Shanjun Li

American Economic Review · 2025 · Volume 115 · Issue 11

DOI: 10.1257/aer.20221501

Abstract

This paper studies the impact of quid pro quo (technology for market access) in facilitating knowledge spillovers and quality upgrading in the Chinese automobile industry. The identification strategy exploits within-product quality variation across a rich set of quality dimensions. We find affiliated domestic automakers adopt more similar quality strengths of their joint venture partners, consistent with knowledge spillovers. Additional analysis suggests worker flows and supplier networks mediate knowledge spillovers. Knowledge spillovers due to ownership affiliation under quid pro quo contributed 8.3 percent of the quality improvement experienced by affiliated domestic models from 2001 to 2014, relative to nonaffiliated domestic models.

Keywords

Multinational Firms, International Business, Information and Product Quality, Standardization and Compatibility, Contracting Out, Joint Ventures, Technology Licensing, Automobiles, Other Transportation Equipment, Related Parts and Equipment, Industrialization, Manufacturing and Service Industries, Choice of Technology, Technological Change: Choices and Consequences, Diffusion Processes, Socialist Systems and Transitional Economies: Factor and Product Markets, Industry Studies, Population

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