The Nexus between Foreign Competition and Buying Innovation: Evidence from China’s High-Technology Industry
Round 1
Reviewer 1 Report
The Nexus between Foreign Competition and Buy Innovation, 2 Evidence from China's High-Technology Industry
COMMENTS #1: Title is adequate.
COMMENTS #2: moving towards the 'Introduction' part, which is fine, but authors have to justify the importance of the article in context to their proposed title that why it is necessary. In the last paragraph of the Introduction, the authors have to revise the significant objectives of the study. The motivation and novelty of the paper should be revised.
COMMENTS #3: The contribution of the article is not clear. It is recommended to make to clearer what's new contributions and innovation of this study.
COMMENTS # 4: Results Section provided enough inputs. It is recommended to add some extra robustness analysis. Finally, the policy choice deriving by this tool. I suggest the authors define a specific policy implication that defines the policy aspect of your findings.
COMMENTS #5: Authors are suggested to improve the conclusion section as well since it is broadly handled and should be very concrete for the description of the results followed by the policy recommendation part.
Author Response
Dear Reviewer
We are uploading our response to your comments as a collective word file. Please see the attachment.
With best regards
Corresponding Authors
Author Response File: 
Author Response.pdf
Reviewer 2 Report
1. In the form:
* The paper needs more imporvement ( Edit from the beguin to the conclusion)
* Paraphraphs: Max 5to 6 sentences
* Grammar and speling to revise carefully
* Table-s : to edit again
* You have DISCUSSION section and Discussion & Conclusion : Please delete the last one.
2. Abstract : Follow this methodology ; Background- Study's aim- Method and design- Fundings- Original value- Limitation and implication policy.
3. Introduction: Authors could repare clair paragraphs.
4. Literature review: Authors could repare clair paragraphs. Edit again.
Recent research sutdies (It seem some in the reference section are not well related to your theory section. We recommende to delete :
. Tandrayen-Ragoobur, V.J.T.J.o.I.T.; Development, E. The innovation and exports interplay across Africa: Does 1012 business environment matter? The Journal of International Trade Economic Development 2022, 31, 1041-1071.
Hlioui, Z.; Gabsi, M.; Omri, A.J.S. Informal Competition Effect on SMEs’ Innovation: Do Credit Constraints 1017 Matter? Evidence from Eastern European Countries. Sustainability 2022, 14, 13874
Aghion, P.J.S.B.E. Entrepreneurship and growth: lessons from an intellectual journey. Small Business Economics 1040 2017, 48, 9-24.
Song, H.J.; Yoon, Y.N.; Kang, K.H.J.I.J.o.H.M. The relationship between board diversity and firm performance 1065 in the lodging industry: The moderating role of internationalization. International Journal of Hospitality 1066 Management 2020, 86, 102461.
Elsayed, K. Does CEO duality really affect corporate performance? Corporate Governance: an international review 1104 2007, 15, 1203-1214.
Yang, G.; Deng, F.J.H. Can digitalization improve enterprise sustainability?–Evidence from the resilience 1150 perspective of Chinese firms. 2023, e14607.
Aflaki, S.; Basher, S.A.; Masini, A.J.C.T.; Policy, E. Technology-push, demand-pull and endogenous drivers of 1154 innovation in the renewable energy industry. Clean Technologies Environmental Policy 2021, 23, 1563-1580.
Chakravorty, U.; Liu, R.; Tang, R.; Zhao, L.J.A.a.S. Firm innovation under import competition from low-wage 1162 countries. Available at SSRN 4020433 2022.
* Author could read and add these research papers to improve more the literature section and the discussion section:
Luigi A.; Mohsen, B.; Xihui, C.; Concetto, P.V. 2021.Knowledge spillovers and technical efficiency for cleaner production: An economic analysis from agriculture innovation, Journal of Cleaner Production,Vol.320,128830, https://doi.org/10.1016/j.jclepro.2021.128830.
Ibtissem, M., Mohsen, B., & Jaleleddine, B.R. (2018). Quantitative relationship between corruption and development of the Tunisian stock market. Public and Municipal Finance, 7(2), 39-47. doi:10.21511/pmf.07(2).2018.04
Aldieri, L.; Brahmi, M.; Bruno, B.& Vinci, C.P. 2021. Circular Economy Business Models: The Complementarities with Sharing Economy and Eco-Innovations Investments, Sustainability,13(22),12438. https://doi.org/10.3390/su132212438
Arabeche, Z.; Soudani, A.; Brahmi, M.; Aldieri, L.; Vinci, C.P.& Abdelli, M.E.A. 2022. Entrepreneurial Orientation, Organizational Culture and Business Performance in SMEs: Evidence from Emerging Economy, Sustainability, 14(9), 5160. https://doi.org/10.3390/su14095160
5- Empirical section :
* 'Data and Variable Measures , used panel data from the China Statistical Yearbook on high technology sectors, which was compiled by China's National Bureau of Statistics (NBS) between 2010 and 2017.' The study can be more relevent if the period is more recent and update to- 2022.
* Provide us the input data, for :
Table 2: Summary of Descriptive Statistics
Table 3: Summary of OLS and Robust OLS Regression Analysis Results
Table 4: Quantile Regression Analysis: Key Results
Figure 1: Estimates for foreign competition.
6- Limitations and Future Research : add implication plocy.
7. Reference section : to add all new cited papers.
Author Response
Dear Reviewer
We are uploading our response to your comments as a collective word file. Please see the attachment.
With best regards
Corresponding Authors
Author Response File: Author Response.pdf
Reviewer 3 Report
REVIEW OF SUBMISSION TO SUSTAINABILITY –– 2296273 – “THE NEXUS BETWEEN FOREIGN COMPETITION AND BUY INNOVATION: EVIDENCE FROM CHINA’S HIGH-TECHNOLOGY INDUSTRY”
Summary of the paper
Using data from the People’s Republic of China, this paper investigates the association between buy innovation and foreign competition, for companies in high-technology industries. The hypothesis (unstated) is that the relation follows a U-shape.
The hypothesis is tested via Ordinary Least Squares and quantile regression. It appears that the industry-year is the unit of observation. The dependent variable is the natural logarithm of expenditure on importing technology from abroad and locally purchased technologies. This is interpreted as a proxy for buy innovation. The independent variable of interest is the natural logarithm of the ratio of the value of import products to total manufacturing costs. This is regarded as a measure of foreign competition. The study controls for industry-year size, the year of the investigation period from which the observation is drawn and industry concentration. The investigation period is 2010-2017. The final sample comprises 170 industry-year observations. All of the data are provided by the People’s Republic of China’s National Bureau of Statistics.
The results of the quantile regression analysis support the hypothesis. The results suggest that the turning point of the U occurs between the 10th and 25th quantiles.
Critical review
Motivation
A strength of this paper is its sound motivation. The authors lucidly argue the business motivation. (i.e., corporate innovation is essential for national economic development and growth.) They also coherently argue an academic motivation. Their study’s use of quantile regression analyses provides econometric advantages over previous research.
Introduction
The introduction is very disjointed. The statistics discussed on pp.1-2 are misplaced. The focus should be on the overall interpretation of the trends, rather than minutiae, especially for an introduction. The definitions of “make innovation” and “buy innovation”, provide on p.9, belong in the introduction. The highlighted paragraph on p.3, currently in the introduction, belongs in the literature review. The second full paragraph on p.16 argues that use of quantile regressions is a unique contribution of the paper. This discussion belongs in the introduction.
Literature review
The authors have discussed suitable papers in their literature review and presented logical discussion of these papers.
However, the structure of the literature review lacks coherence. It is organised on a paper-by-paper basis. A thematic basis would be much more appropriate. I suggest the authors group the papers, according to which determinant(s) of the relation between buy innovation and foreign competition they elucidate. The following determinants are identified: domestic product market competition, the extent to which a company’s competitive strategy relies of cost leadership versus differentiation (Porter, 1979), the level of Foreign Direct Investment, the extent to which the industry is technology-dependent and organisation size (small to medium enterprise versus non-small to medium enterprise).
The discussion of the evidence regarding Foreign Direct Investment, as a possible determinant of the strength of association between buy innovation and foreign competition (the highlighted section spanning pp.4-5) is exemplary, as a thematic discussion. The highlighted discussion on p.6 should be re-located to this section.
Hypothesis development
Throughout the paper, it is clear that the authors are arguing that the relation being investigated follows a U-shape. This expectation should be articulated as a formal hypothesis, is a separate hypothesis development section. The final full paragraph on p.16 belongs in the hypothesis development.
Methodology
In general, the methodology is sound and suited for testing the hypothesis.
However, I have some concerns. It seems that the industry-year is the unit of observation. Clarify if this is correct. The OLS estimation should include, as an independent variable, the square of the measure of foreign competition. This is essential to enable to model to capture the hypothesised non-linearity. The approach of including the year as one independent variable is inappropriate; this imposed an unwarranted structure on this control. Instead, the authors should use seven dummy variables, to distinguish the eight years of the investigation period. Regarding the measure of industry concentration, the authors should clarify what is measured in the denominator. (i.e., “The sub-sector’s total value” is insufficient.) The economic rationales for the control variables are alluded to, throughout the paper. However, this discussion belongs in the methodology section, with the coverage of the control variables.
Sample selection
The final sample comprises 170 industry-years, rather than 192. (i.e., 24 industries * 8 years = 192 industry-years.) What filters were applied to delete 22 observations?
Data collection and descriptive statistics
I have no criticisms of these dimensions of the paper.
Empirical results
I will not comment on the results in Table 3. They are meaningless, without the squared term, as an independent variable.
The authors appropriately comment that the results in Table 4 support the hypothesis of a U-shaped relation and that the turning point is between the 10th and 25th quantiles. This discussion is dispersed into S4.5 and S4.6. It belongs in a sub-section dedicated to commenting on the results in Table 4.
Conclusions
I have no criticisms of this dimension of the paper.
Presentation
I have two other presentational concerns. The discussion of the econometric advantages of quantile regression over OLS should be greatly condensed. This is not an econometric paper. A concise version of this discussion belongs in the introduction since this is a unique contribution of the paper. Figure 1 and the accompanying discussion should be deleted. The tables are standalone.
Recommendation
This paper has sound foundations and potential. However, it appears that the authors have focused myopically on producing a credible result, marginalising the “front end” of the paper. Journal submission was premature. Hence, I recommend rejection from Sustainability.
Reference, not cited in the paper
Porter, M., 1979, “How Competitive Forces Shape Strategy”, Harvard Business Review 57, 137-145.
Author Response
Dear Reviewer
We are uploading our response to your comments as a collective word file. Please see the attachment.
With best regards
Corresponding Authors
Author Response File: Author Response.pdf
Round 2
Reviewer 1 Report
The Nexus between Foreign Competition and Buy Innovation, Evidence from China's High-Technology Industry. I am pleased to inform the sustainability Team hat the revised version of the publication has been reviewed and is ready for publication. The authors have diligently addressed the comments on my suggestions, and I am confident that the revised version meets your expectations.
Author Response
We are uploading our response as a word document for which please see the attachment.
Thank you.
Author Response File: Author Response.pdf
Reviewer 2 Report
Dear author,
-Thank you for this draft revision form. But we need full revised version to be uploaded in the system.
-The second version of the abstract to delete (do not forget).
- Revise all the forms (spelling, grammar, etc). Exp : Appendix: 1Appendix: 1Appendix: 1 (see the line 513). There are many repetitions to revise them.
Please, revise it in good way and upload it for consideration.
G luck.
Author Response
We are uploading our response as a word file for which please see the attachment.
Thank you.
Author Response File: Author Response.pdf
Reviewer 3 Report
REVIEW OF SUBMISSION TO SUSTAINABILITY – 2296273 REVISION 1– “THE NEXUS BETWEEN FOREIGN COMPETITION AND BUY INNOVATION: EVIDENCE FROM CHINA’S HIGH-TECHNOLOGY INDUSTRY”
Summary of the paper
This paper uses data from the People’s Republic of China to investigate the impact on corporate innovation of foreign competition. The authors hypothesize a U-shaped association.
The paper uses quantile regression analysis – a non-Ordinary Least Squares methodology that permits non-monotonicity in the association between the dependent variable and the independent variable of interest. The data comprise 170 industry-year observations, sampled from the investigation period 2010-2017. The data are sourced from China’s National Bureau of Statistics. The empirical results support the hypothesis. They suggest that the turning point of the U-shape occurs between the 10th an 25th percentiles.
Critical review
Introduction
All of the content appropriate for an introduction is present.
However, this section contains some superfluous discussion that would be better suited for other sections of the paper. The first paragraph belongs in a separate section, dedicated to discussion unique institutional features of the People’s Republic of China. The second paragraph belongs in the literature review. The paragraph spanning pages 3 and 4 also belongs in the literature review.
Literature review
The literature review is much more coherent, with respect to its thematic structure, than the previous version. However, there is still scope for substantial improvement, in this regard. The discussion should have more paragraph breaks, at the sections where the coverage moves from one theme to another. For example, a new paragraph should begin, on p.5, at the following sentence. “One determinant that has been shown to impact the relationship between buy innovation and foreign competition is domestic product market competition.” Similarly, the sentence commencing with “The level of Foreign Direct Investment (FDI)..” should also mark a new paragraph. On p.6, a new paragraph should start at the sentence commencing the discussion of Xiong et al. (2022). On p.6, a new paragraph should start at the sentence commencing “The extent to which an industry is technology-dependent…” On p.7, the discussion of Hlioui et al. should mark the beginning of a new paragraph.
Porter (1979) has not been used well. The authors merely re-state elements of this framework. It would be more appropriate to use the Porter theory as a lens for interpreting the results of some of the studies reviewed. For example, the results of Yang et al. (2022) may be due to some high-technology industries having low entry barriers and high levels of competition among incumbents.
The African paper reviewed relates to a consequence, rather than a cause of corporate innovation. This discussion should be deleted.
The first full paragraph on p.8 belongs in a separate section, about relevant institutional features of the People’s Republic of China.
Hypothesis development
It is apparent, from the paper that the authors are hypothesising a U-shaped relation between buy innovation and foreign competition. This conjecture should be formally articulated, in a hypothesis development section.
Methodology
A methodological strength is use of the quantile regression methodology.
The current version adequately explains the rationale for the size control.
However, the economic rationales for the other two controls (time frame and industry concentration) are not adequately explained. A suggestion is that inclusion of the time frame variable may control for contemporaneous changes in government policy and macroeconomic conditions that may affect the level of buy innovation.
Some of the variable specifications are inadequately explained. The paper still does not clarify whether time frame is controlled for via a series of fixed yearly dummies or one continuous variable. I believe that the former would be more appropriate. The rejoinder from the authors adequately clarifies the specific of the industry concentration variable. This explanation should be imported to the text of the paper.
Sample selection
The rejoinder from the authors clarifies that 22 industry-year observations were deleted, due to missing data. They should import this explanation into the text of the paper.
Empirical results
There is a serious problem, in the discussion of the results in Table 3. The authors claim that the coefficient of the square on foreign competition is negative. They claim that this result is consistent with a U-shaped relation. The opposite is true. A negative coefficient of the squared term, in a quadratic equation, indicates downward concavity and hence an inverted-U shape. This mistake also appears subsequently in the paper. The first full paragraph on p.21 states that a U-shaped relation is consistent with a level of foreign competition that maximises buy innovation. The opposite is true. A U-shaped relation indicates there is a level of foreign competition that minimizes buy innovation. This seems to be a “silly” mistake.
I suggest that the authors delete Table 3 completely. A key contribution of their paper is use of quantile regression analysis. Hence, they should focus on Table 4. The content of the current Table 3 should be relegated to one paragraph, at the end of the section discussing the empirical results. This paragraph should explain that the authors also estimated a model using Ordinary Least Squares regression, containing the square of foreign competition as an independent variable. They should explain that the coefficient of this square term is negative, inconsistent with their hypothesis. They should conclude this paragraph by noting that they regard the results from using quantile analysis as more credible, due to econometric features.
The final paragraph of S4.5 belongs in the conclusions section. Otherwise, this section should be deleted.
Conclusions
The authors state that a policy implication of their findings is that policymakers should recognise that “promoting innovation is one industry may not necessarily lead to similar outcomes in other industries”. This cannot be inferred from a single-industry study. I suggest the authors delete this comment.
Presentation
I still have several presentational concerns.
The authors have not sufficiently culled discussion of econometric features of quantile regression. I suggest that Section 3.1 be limited to the first sentence on p.10, the first sentence of the second paragraph on p.10 (about linear programming), low versus high quantiles of the dependent variable and correction for heteroscedasticity.
Table 3 does not include the coefficients of the square on foreign competition. However, these coefficients are discussed. Hence, this omission seems to be an oversight.
Reference [49] in the list of references is not the same as the study cited as Reference [49], on p.7 of the text.
Recommendation
I acknowledge that the current version reflects a substantial improvement over the previous version. However, some of my criticisms have not been addressed. It appears that the authors are still making “silly” errors, out of haste. The most serious of these is their erroneous interpretation of a U-shaped association.
Author Response
We are uploading our response as a word file for which please see the attachment.
Thank you.
Author Response File: Author Response.pdf
Round 3
Reviewer 3 Report
REVIEW OF SUBMISSION TO SUSTAINABILITY – 2296273 REVISION 2– “THE NEXUS BETWEEN FOREIGN COMPETITION AND BUY INNOVATION: EVIDENCE FROM CHINA’S HIGH-TECHNOLOGY INDUSTRY”
Summary of the paper
Please refer to my reports of the previous versions of this paper.
Critical review
I have decided to limit my report to the “front end” of this paper. The literature review, discussion of China’s institutional environment and the hypothesis development need to be fundamentally improved, before it is possible to referee the remainder of the paper.
Overall suggestion for structure of the “front end”
The sections should be ordered as follows: Introduction, literature review, discussion of relevant institutional features of the People’s Republic of China, hypothesis development. It is critically important that the other three items are in standalone sections, rather than being within the introduction.
Introduction
The first paragraph belongs in the discussion of institutional features of the People’s Republic of China, rather than the introduction.
The two paragraphs in coloured font, on p.2, belong in the introduction, rather than the discussion of institutional features of the People’s Republic of China.
Literature review
The literature review has improved from the previous version of the paper. The first paragraph is well-written. Suitable themes have been identified, related to variables that may influence the sign and strength of the association being studied. These variables include level of technology prevalent within the industry, competitive strategy and Foreign Direct Investment (in addition to other variables).
The authors have used the essence of Porter (1979) lucidly. However, the continual statement, “These results can be interpreted through Porter’s framework..” is repetitive and annoying. The authors should make their evaluations at the end of each paragraph (devoted to a particular theme), rather than each paper. They should also canvass the literature in an integrated fashion, rather than on a paper-by-paper basis. Some suggestions follow.
A possible re-write of the discussion of technological dynamism and inward-bound Foreign Direct Investment:
“Evidence indicates that foreign players stimulate innovation by local incumbents (Aghion et al., 2006). Do any of the other papers reviewed arrive at similar conclusions? If so, cite these papers here. This heightened innovation may be regarded as a strategy to alleviate the competitive threat, within the product market, posed by incumbents and potential new entrants (Porter, 1979). Unsurprisingly, evidence indicates that this mechanism is stronger for companies with higher technological dynamism (Aghion et al., 2006).”
Foreign competition may be intensified by inward-bound Foreign Direct Investment. The latter enhances incumbents’ access to new technologies, knowledge and skills (Blömstrom et al., 1998). Product market players would be able to utilise these resources to improve their competitive strategies, irrespective of whether they principally compete via cost leadership or differentiation (Porter, 1979).
A suggested re-write of the discussion of corporate and competitive strategy:
“Corporate and competitive strategy may also affect the relationship between innovation and foreign competition. Evidence from Chile (Cusolito et al., 2023) indicates that firms with higher pricing mark-ups are generally less vulnerable to foreign competition. A possible explanation is that these firms are more likely to be differentiators versus cost leaders. Potential foreign entrants to the product market may find it more difficult to emulate their differentiating strategies (Porter, 1979). Conversely, there it has been counter-argued that differentiators may be more sensitive to foreign competition (Teece, 1986). A likely explanation is that that management may perceive that the foreign players are better equipped to mimic their differentiation strategies, compared to domestic players (Porter, 1979). Is there any evidence to support the prediction of Teece (1986)? If so, discuss it here. These conflicting expectations motivate re-investigation of the research question, in a different institutional setting.”
A possible re-write of the discussion of technological dynamism and outward-bound Foreign Direct Investment:
“Innovation may be a critical success factor for functional cross-border management of multinational corporations, in order to transverse differences in culture, level of economic development and other institutional features (Xiong et al., 2022). Hence, product market incumbents with greater geographical diversification may engage in more buy innovation than competitors operating only in one country. This would magnify the entry barrier faced by potential new entrants (Porter, 1979).
Discussion of unique institutional features of the People's Republic of China
The first paragraph of S1.1 is most appropriate for this section.
I refer the authors to Yu and Wang (2020) for an exemplar of discussion of unique institutional features of the People’s Republic of China, to motivate this empirical setting.
Hypothesis development
Section 1.2.1, titled “Theoretical Background and Rationale for the Hypothesis Development”, should be part of the hypothesis development, rather than a standalone sub-section. It is critical for readers to have understanding of the theory from which the hypotheses are argued, to follow the logic in the hypothesis development. Hence, the theoretical background should precede the articulation of hypothesis.
There is a fundamental problem with the logic. The authors argue that the association investigated is positive for low levels of foreign competition. They continue to argue that beyond a certain threshold, the association becomes negative. This scenario is consistent with an inverted-U, rather than a U.
I suggest the authors consider the theory, without any regard for their research design and findings. Which set of mechanisms becomes stronger, beyond a threshold level of foreign competition? Their answer should be argued on the basis of the unique institutional features of the People’s Republic of China.
Reference, not cited in the paper
Yu, X. and P. Wang, 2020, “Government Control and the Value of Cash: Evidence from Listed Firms in China”, Review of Quantitative Finance and Accounting 55 (4), 1,341-1,369. https://doi.org/10.1007/s11156-020-00876-y
Author Response
We provided a point-by-point response to the reviewer's comments, please see the attached file.
Thank you.
Author Response File: Author Response.pdf
