The Impact of Economic Policy Uncertainty on Chinese Firms’ Innovation Investment: Impact Direction and Mechanism Analysis
DOI:
https://doi.org/10.54097/hbem.v20i.14414Keywords:
Economic policy uncertainty, Corporate innovation, Corporate investment, China.Abstract
This paper empirically examines the impact of the Chinese economic policy uncertainty (EPU) on corporate innovation. It is discovered that EPU generally has a positive impact on firms’ innovation investment and inhibits enterprise innovation investment through real option and financial friction mechanisms, according to EPU index and data from Chinese A-share and growth enterprise market (GEM) listed companies. Further, the real options channel dominates the overall sample, and corporate innovation investment is inhibited by financial frictions more strongly for non-state-owned firms than for state-owned companies. In addition to advancing the understanding of corporate innovation investment, this paper offers empirical support for the role that economic policy uncertainty plays in encouraging corporate innovation investment and verifies the dominant influence mechanism that prevails across various firm types.
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