The impact of economic policy uncertainty on corporate innovation in China: the role of family ownership and political connections

Sultan Sikandar Mirza, Tanveer Ahsan, Bakr Al-Gamrh, Muhammad Ansar Majeed and Fazal Muhammad
Additional contact information
Sultan Sikandar Mirza: University of Waikato [Hamilton]
Tanveer Ahsan: ESC [Rennes] - ESC Rennes School of Business
Bakr Al-Gamrh: ESC [Rennes] - ESC Rennes School of Business
Muhammad Ansar Majeed: ZJSU - Zhejiang Gongshang University [Hangzhou]
Fazal Muhammad: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique

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Abstract: Economic policy uncertainty (EPU) may pose a risk or provide an opportunity for corporations. This study empirically investigates the impact of EPU on the corporate innovation of Chinese firms using patent information as a proxy for corporate innovation. The study then examines whether family ownership and political connections impede/boost corporate innovation. Using a longitudinal panel dataset of 3,085 Chinese firms listed during the period from 2009 to 2020, the study observes that EPU enhances corporate innovation in China. The study also finds that family firms negatively impact innovative projects during EPU. The study then shows that political connections positively moderate the effects of EPU on corporate innovation. The results of the study are robust to time and industry fixed effects, endogeneity issues, and firm-level time-varying factors.

Keywords: Corporate innovation; family ownership; political connections; policy uncertainty; China; C23; G11; G30; G38 (search for similar items in EconPapers)
Date: 2023
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Published in Applied Economics, 2023, Applied Economics, ⟨10.1080/00036846.2023.2291414⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04388100

DOI: 10.1080/00036846.2023.2291414

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