Geopolitical risk and corporate innovation: Evidence from risk preference and risk-taking capacity perspectives

This paper investigates how geopolitical risk affects corporate innovation from the perspectives of corporate risk preference and risk-taking capacity. We document a significant positive impact of geopolitical risk on corporate innovation and find that corporate risk preference and risk-taking capacity strengthen the positive impact of geopolitical risk. Further analysis shows that market competition and corporate financial asset holdings are potential channels through which geopolitical risk increases corporate innovation.