Uncertainty shocks, transnational innovation collaboration, and Chinese firm innovation

Exploiting the quasi-natural experiment of the U.S.-China trade friction, we empirically examine the impact of uncertainty shocks on Chinese firms' overseas patent applications and transnational innovation collaboration. We find that uncertainty shocks suppress Chinese firms’ overseas innovation performance, resulting in a disruption effect on innovation collaboration with the U.S., but a diversion effect on collaborations with other countries, which is particularly evident in U.S. innovation partners, Europe, Association of South East Asian Nations (ASEAN), Japan, and South Korea. Heterogeneity analysis shows that these shocks disproportionately affect high-tech industries, industries with strong influence, and those with close U.S.-China innovation linkages.