Technological innovation under trade disputes: how does product market competition matter?

Abstract

PurposeThis study investigates firms' innovation behaviour under environmental change. Therefore, it examines the effect of trade disputes on corporate technological innovation and how product market competition moderates this relationship.Design/methodology/approachThis research tests the hypotheses using the fixed effects model based on panel data of publicly listed enterprises in China from 2007–2020.FindingsThe empirical results validate the positive association between trade disputes and corporate research and development (R&D) intensity as well as the U-shaped relationship between trade disputes and radical innovation. Additionally, the moderating effect of product market competition is verified: a concentrated market with less competition flattens the U-shaped curve of radical innovation induced by trade disputes; as the market becomes more concentrated and less competitive, the U-shaped relationship eventually turns into an inverted U.Originality/valueFirst, this study contributes to the corporate innovation and trade dispute literature by expanding the environmental antecedents of technological innovation and the firm-level consequences of trade disputes. Second, this study enriches the theoretical framework of the environment–innovation link through an integrated perspective of contingency theory and dynamic capabilities view. Third, instead of the traditional linear mindset which had led to contradictory results, this study explores a curvilinear effect in the environment–innovation relationship.