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US sanctions and corporate innovation: Evidence from Chinese listed firms

Year: 2025

Type: article

Abstract: Competition in the domains of science and technology has emerged as a central aspect of the rivalry between China and the United States. In response to national security concerns and foreign policy objectives, the U.S. government has placed numerous Chinese high-tech companies on its entity list to impede their development. This paper utilizes the imposition of U.S. entity list sanctions as an exogenous shock to investigate the impact of these sanctions on innovation within Chinese firms. Our findings indicate that U.S. sanctions stimulate both innovation inputs and outputs among Chinese companies. Following their inclusion on the U.S. sanctions list, these firms experience an increase in government subsidies and are perceived as possessing enhanced investment value. Moreover, the influence of U.S. sanctions on innovation is particularly pronounced when companies encounter intense competition in product markets and have access to substantial internal talent reserves.

Source: International Review of Economics & Finance

DOI: 10.1016/j.iref.2025.103935

Authors: Xiaowei Lin, Pengdong Zhang, Zhihao Yang, Sicen Chen

Institutions: Fuzhou University of International Studies and Trade, Sun Yat-sen University, University of International Business and Economics, Agricultural Bank of China, Xiamen National Accounting Institute

Language: English

Topic: Economic Sanctions and International Relations

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Industry, innovation and infrastructure, Peace, justice, and strong institutions, Decent work and economic growth

Open Access status: gold

Estimated APC paid: $1,930