Abstract
The motivation of this paper is to explore the impact of the Sino-US trade war on the R&D investment of Chinese exporting family firms (FFs). Applying a difference in difference (DID) methodology, we are able to compare FFs who have export business with FFs who have not export business, and compare FFs that have export business before and after the Sino-US trade war. We find that family firm export significantly promotes R&D investment in an emerging market context, but the Sino-US trade war negatively affects the R&D investment effect of exports. This means that the trade war has indeed reduced R&D investment by Chinese FFs. Moreover, the relationship between trade war and export R&D investment effect is governed by family ownership, institutional ownership, and government subsidy. This paper contributes to our understanding of the important role of trade war in technological innovation strategy of FFs.
Plain English Summary
This research demonstrates that family firm export significantly promotes R&D investment, but the Sino-US trade war negatively affects the R&D investment effect of exports. In addition, the study found that there are three factors that can mediate the above relationship. Family ownership boosts FF’s export R&D investment effect and insulates it from the trade war. On the contrary, institutional shareholding inhibits the promotion effect of exports on R&D investment and exacerbates the negative impact of the trade war. Although government subsidies will enhance the effect of family firms’ export R&D investment, they will also increase the adverse impact of the trade war. Thus, the principal implications of this study are (1) families should increase their shareholding in FFs as it plays an important role in increasing the R&D input effect of exports and reducing the adverse impact of trade wars, and (2) government subsidies are a double-edged sword for FFs and should be used with caution.
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Notes
Because of the short dimension of the panel we did not insert the lagged R&D as a further control. Since the lagged dependent is endogenous, to instrument it with further lags implies a huge loss of observations.
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Yu, J., Mao, Y. & Guo, P. Firm export, trade war, and R&D investment of family firm. Small Bus Econ (2024). https://doi.org/10.1007/s11187-024-00924-0
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DOI: https://doi.org/10.1007/s11187-024-00924-0