The bright side of being uncertain: the impact of economic policy uncertainty on corporate innovation
International Journal of Operations & Production Management
ISSN: 0144-3577
Article publication date: 8 January 2024
Issue publication date: 22 October 2024
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.
Keywords
Acknowledgements
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.
Citation
Liang, C., Lee, P.K.C., Zhu, M., Yeung, A.C.L., Cheng, T.C.E. and Zhou, H. (2024), "The bright side of being uncertain: the impact of economic policy uncertainty on corporate innovation", International Journal of Operations & Production Management, Vol. 44 No. 11, pp. 1918-1945. https://doi.org/10.1108/IJOPM-05-2023-0386
Publisher
:Emerald Publishing Limited
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