The influence of trade policy uncertainty on corporate innovation strategies

Fang Zheng, Xue Chen and Yun Sun

Finance Research Letters, 2025, vol. 75, issue C

Abstract: This paper investigates the impact of rising trade policy uncertainty on the innovation activities of Chinese firms, focusing on A-share listed companies from 2012 to 2021. The study finds that increased trade policy uncertainty significantly stimulates innovation among Chinese firms, especially among non-state-owned enterprises. This effect is mediated through firms' financing constraints, as rising uncertainty leads to a reallocation of funds within firms, with the R&D sector receiving relatively less constrained financing. The results show that while both state-owned and non-state-owned enterprises benefit from uncertainty-driven innovation, the effect is more pronounced among non-state-owned enterprises.

Keywords: Trade policy uncertainty; Firm innovation; Trade friction (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325001862

DOI: 10.1016/j.frl.2025.106922

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