Does corporate perception influence radical innovation in China?

As the macro-financial system becomes more complex and unstable, the volatility of monetary policy increases, which inevitably affects firms’ innovation behaviour. This study focuses on firms’ perceived monetary policy uncertainty (MPU) and the duality of innovation structure by constructing a new field patent index to measure the degree of radical innovation, and empirically examines the impact of MPU on firms’ radical innovation. Based on the panel data of Chinese listed manufacturing firms, we find that increased MPU and firm perceptual capabilities significantly promote firm radical innovation. Mechanism analysis indicates that higher perceived MPU leads to increased corporate openness, equity concentration, and long-term borrowing, thus creating favourable conditions for radical innovation. Finally, heterogeneity analysis reveals that the positive impact of MPU on radical innovation is more pronounced in centrally controlled, high-tech, large-size, and highly financially constrained firms. These findings shed light on the micro-mechanism of how MPU affects firms’ innovation structure and the importance of improving firms’ ability to perceive MPU.