TY - JOUR
T1 - Sharing weal and woe
T2 - Do geopolitical risks affect corporate innovation? A global supply chain perspective
AU - Huang, Ziyin
AU - Guo, Zhuopin
AU - Chen, Junsong
AU - Huang, Jin
N1 - Publisher Copyright:
© 2025
PY - 2025/10
Y1 - 2025/10
N2 - Two theories offer conflicting predictions on the relationship between uncertainty from geopolitical risks (GPR) and firm innovative investment and have not yet reached a consensus. To reconcile the two strands of literature and provide a fuller picture of GPR's effect, we explore the influence of GPR on companies' R&D investment in the global supply chain setting. By applying the customer-induced GPR we find that GPR has a positive impact on R&D investment. The results are robust after using different measures of GPR and instrumental variable approach. Moreover, we investigate the mechanism through which GPR affects firm R&D investment and find that growth option and firm liquidity are the main mechanisms. Further empirical analysis indicates that this positive impact is strengthened for firms that operate in high-tech industries, or have weaker political connections. Moreover, the positive impact of customer-induced GPR only generates when the largest company has a high sales proportion of the focal company.
AB - Two theories offer conflicting predictions on the relationship between uncertainty from geopolitical risks (GPR) and firm innovative investment and have not yet reached a consensus. To reconcile the two strands of literature and provide a fuller picture of GPR's effect, we explore the influence of GPR on companies' R&D investment in the global supply chain setting. By applying the customer-induced GPR we find that GPR has a positive impact on R&D investment. The results are robust after using different measures of GPR and instrumental variable approach. Moreover, we investigate the mechanism through which GPR affects firm R&D investment and find that growth option and firm liquidity are the main mechanisms. Further empirical analysis indicates that this positive impact is strengthened for firms that operate in high-tech industries, or have weaker political connections. Moreover, the positive impact of customer-induced GPR only generates when the largest company has a high sales proportion of the focal company.
KW - China
KW - Corporate innovation
KW - Geopolitical risk
KW - R&D
KW - Supply chain
UR - https://www.scopus.com/pages/publications/105011182321
U2 - 10.1016/j.irfa.2025.104474
DO - 10.1016/j.irfa.2025.104474
M3 - Article
AN - SCOPUS:105011182321
SN - 1057-5219
VL - 106
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
M1 - 104474
ER -
