The Bright Side of Being Uncertain: The Impact of Economic Policy Uncertainty on Corporate Innovation

Chen Liang; Peter K C Lee; Minghao Zhu; Andy Yeung; T.C. Edwin Cheng; Honggeng Zhou

doi:10.1108/IJOPM-05-2023-0386

The Bright Side of Being Uncertain: The Impact of Economic Policy Uncertainty on Corporate Innovation

Chen Liang, Peter K C Lee, Minghao Zhu, Andy Yeung, T.C. Edwin Cheng, Honggeng Zhou

Research output: Contribution to journal › Article › peer-review

7 Citations (Scopus)

192 Downloads (Pure)

Abstract

Purpose: This study aims to theoretically hypothesize and empirically examine the impact of economic policy uncertainty (EPU) on firms' innovation performance as well as the contingency conditions of this relationship. Design/methodology/approach: This study collects and combines secondary longitudinal data from multiple sources to test for a direct impact of EPU on firms' innovation performance. It further examines the moderating effects of firms' operational and marketing capabilities. A series of robustness checks are performed to ensure the consistency of the findings. Findings: In contrast to the common belief that EPU reduces the innovativeness of firms, the authors find an inverted-U relationship between EPU and innovation performance, indicating that a moderate level of EPU actually promotes innovation. Further analysis suggests that firms' operational and marketing capabilities make the inverted-U relationship steeper, further enhancing firms' innovation performance at a moderate level of EPU. Originality/value: This study adds to the emerging literature that investigates the operational implications of EPU, which enhances our understanding of the potential bright side of EPU and broadens the scope of operational risk management.

Original language	English
Pages (from-to)	1918-1945
Number of pages	28
Journal	International Journal of Operations and Production Management
Volume	44
Issue number	11
Early online date	8 Jan 2024
DOIs	https://doi.org/10.1108/IJOPM-05-2023-0386
Publication status	Published (in print/issue) - 22 Oct 2024

Bibliographical note

The authors thank Professor Constantin Blome, an anonymous Associate Editor and two anonymous reviewers for their insightful comments and useful suggestions, which help improve the quality of this paper. Andy C.L. Yeung was supported in part by PolyU’s funding No. 99QP. The authors acknowledge Peter K.C. Lee and Minghao Zhu as the co-first authors for this paper. Since submission of this article, the following author(s) have updated their affiliation(s): Peter K.C. Lee is at the Aston Business School, Aston University, Birmingham, UK.

Publisher Copyright:
© 2023, Emerald Publishing Limited.

Keywords

Economic policy uncertainty
Corporate innovation
Organizational capability
Inverted-U relationship
China

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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Cite this

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abstract = "Purpose: This study aims to theoretically hypothesize and empirically examine the impact of economic policy uncertainty (EPU) on firms' innovation performance as well as the contingency conditions of this relationship. Design/methodology/approach: This study collects and combines secondary longitudinal data from multiple sources to test for a direct impact of EPU on firms' innovation performance. It further examines the moderating effects of firms' operational and marketing capabilities. A series of robustness checks are performed to ensure the consistency of the findings. Findings: In contrast to the common belief that EPU reduces the innovativeness of firms, the authors find an inverted-U relationship between EPU and innovation performance, indicating that a moderate level of EPU actually promotes innovation. Further analysis suggests that firms' operational and marketing capabilities make the inverted-U relationship steeper, further enhancing firms' innovation performance at a moderate level of EPU. Originality/value: This study adds to the emerging literature that investigates the operational implications of EPU, which enhances our understanding of the potential bright side of EPU and broadens the scope of operational risk management.",

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The Bright Side of Being Uncertain: The Impact of Economic Policy Uncertainty on Corporate Innovation

Abstract

Bibliographical note

Keywords

UN SDGs

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