Transition in the mist: firm-level uncertainty perception and imitative innovation

Abstract

Purpose This paper aims to construct a novel measure of firms’ perceived degree of economic policy uncertainty (EPU) and to examine its impact on imitative innovation. Design/methodology/approach This paper uses text mining methods to extract valid information for management discussion and analysis from the annual reports of Chinese A-share-listed companies from 2009 to 2021. Findings The empirical findings demonstrate that firms that perceive higher uncertainty in economic policies promote increased imitative innovation behaviour. In addition, when uncertainty is high, overly optimistic managers can reduce the imitative innovation of the firm to other firms. Originality/value The paper uses some of the more recent textual analysis techniques in the field of innovation to measure listed firms' perceptions of external EPU and to examine the impact of uncertainty on imitative innovation. Such research enriches the literature on innovation and fills some gaps.