Engaging Customers, Embracing AI: How Suppliers Respond to Trade Tensions and Improve Performance

R. Filieri (), W. Huang, Z. Lin and Q. Xia
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R. Filieri: Audencia Business School

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Abstract: Firms face intensifying pressure to innovate amid escalating US–China trade tensions. This study investigates how they integrate artificial intelligence (AI) to respond to such disruptions. We reconceptualize induced innovation theory as adversity-induced innovation theory and test hypotheses using data from listed Chinese manufacturing firms, WTO tariff records, and customs data (2015–2022). Results indicate that higher tariff exposure increases AI integration, particularly among firms with stronger customer engagement needs. AI integration improves supply chain efficiency, sales performance, and market value. However, performance benefits follow an inverted U-shape: extreme tariff exposure diminishes AI's compensatory effects. The study extends induced innovation theory to geopolitical adversities and advances stakeholder engagement theory by identifying customer engagement as a boundary condition for technology adoption. We establish causal relationships between tariff-induced AI integration and firm performance through instrumental variable analysis and robustness checks. Findings inform how firms can strategically use technological innovation and customer collaboration to strengthen resilience under external shocks. Managers should view trade tensions as catalysts for AI integration rather than merely as obstacles.

Keywords: Generative AI; innovation; tariffs; customer engagement; induced innovation theory (search for similar items in EconPapers)
Date: 2026-01
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Published in Journal of Product Innovation Management, 2026, 43 (1), pp.57-75. ⟨10.1111/jpim.70014⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05460939

DOI: 10.1111/jpim.70014

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