Trade policy uncertainty and corporate innovation evidence from Chinese listed firms in new energy vehicle industry

Highlights: • Uncertainty concerning trade policy is positively associated with more R&D and patents. • Government subsidy mitigates the strength of the relation between trade policy uncertainty and corporate innovation. • Managerial ownership mitigates the strength of the relation between trade policy uncertainty and corporate innovation. Using a sample of Chinese listed firms in new energy vehicle industry over the period of 2007 to 2018, we examine the impact of trade policy uncertainty on corporate innovation. We find that uncertainty concerning trade policy is positively associated with more R&D and patents. Moreover, government subsidy and managerial ownership mitigate the strength of the relation between trade policy uncertainty and corporate innovation. Our conclusions are robust to a variety of sensitivity tests and we use two-stage least squares (2SLS) instrumental variable approach to address the potential endogeneity concerns.