In order to maintain the dominant position occupied by the United States in the global science and technology industry chain, the U.S. Department of Commerce has included Chinese firms in the Entity List, which has intensified the uncertainty of market competition and challenged the innovation capacity of Chinese firms. The Entity List is a coercive economic measure by which the United States attempts to decouple China's science and technology, aiming to curb China's ability to sustain innovation in the high-tech field through trade sanctions, export and investment controls, and a ban on cooperation between Chinese and American enterprises and universities, such as high-level talent training exchanges.
The great power game affects the global development pattern, and the capability of scientific and technological innovation has a direct impact on the competitiveness of both sides of the game, and enterprises are the main body of innovation. Therefore, an in-depth study of the impact of the U.S. Entity List on enterprise innovation can help reveal the opportunities and challenges embedded in the event, help enterprises identify bottlenecks in their own innovation and development, adjust their innovation strategies, and seek to develop key technological directions and entry points. At the same time, government departments can more accurately assess and predict the economic and technological risks that may arise from the incident, formulate response programs and countermeasures, and provide support and guidance for the innovative development of enterprises. However, there is inadequate literature that analyzes the impact on firms' innovation capabilities from the perspective of the great power game. Regarding the impact of the Entity List, the existing literature mainly studies the motivation of sanctions, the risk of decoupling and cutting off the industrial and supply chain, the legal logic, and the impact of enterprises' entry into the Entity List on their innovation capability is rarely discussed, and there is no consensus on the impact of the Entity List.
Taking 1216 Chinese A-share listed companies from 2017 to 2022 as samples, this paper adopts a staggered difference-in-difference model to test the impacts on the innovation capability of Chinese enterprises and the possible development paths against the backdrop of the Sino-US game. It uses the number of patent applications to characterize the innovation output, and examine the overall innovation capability and substantive innovation capability of enterprises through the "total number of patent applications" and "number of invention patent applications", respectively. The study then conducts the PSM equilibrium test to prevent the sample self-selection bias in the control group from affecting the robustness of the results.
It is found that (1) under the impact of entering the entity list, the innovation capability of Chinese listed companies appears to be enhanced with a lag and short-term; (2) the channel analysis reveals that firms included in the entity list enhance their innovation capability through the intangible asset reserve, growth capacity improvement, and value discovery channels; (3) the heterogeneity analysis shows that private firms, as well as access to government subsidies, low agency costs, moderate and less social responsibility, and control of management's base compensation, innovation capability is more significantly positively affected by the entity list. Further analysis reveals that access to the entity list enhances innovation efficiency but does not significantly affect innovation persistence, which may explain the short-term nature of the effect, and that organizational resilience is a potential motivator of firms' enhanced innovation capability.
Therefore, enterprises in the Entity List of should enhance continuous R&D investment, optimize the innovation output process with a focus on substantive innovation; optimize the management of intangible assets, and shape a good corporate image; it is also critical to enhance the efficiency and sustainability of innovation, and establish an emergency response mechanism to enhance organizational resilience under crisis events. While the government should promote cooperation among industries, universities and research institutes to accelerate the application and commercialization of innovation outputs, improve the regulation of corporate information disclosure, strengthen the construction of scientific research infrastructures, promote the efficiency and sustainability of innovation, and shorten the R&D cycle of enterprises.