Innovation is a vital factor driving the development of core competitiveness and the upgrade of economic structure., and its dynamic evolution mechanism has always been the research focus in the field of industrial economics and international trade. As complex international dynamics emerge in a globalized world, negative economic shocks can leave long-lasting impacts on firms innovation capabilities. This study utilizes the 2018 US-China trade war as a quasi-natural experiment, and a multi-dimensional econometric analysis framework are constructed to examine how trade frictions influence firm-level innovation in China. Constructing a difference-in-differences model, analysis of 2013-2023 firm data indicate that the US-China trade conflict causes a significant decline in innovation activity, but high industry competition and government subsidies mitigate its impact. This study further clarifies the effects of trade friction on firm innovation by contributing to the existing literature and providing empirical evidence as well as policy implications for fostering innovation capacity and resilience.
Hui Chen (Wed,) studied this question.
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