Impact of Epidemics on Enterprise Innovation: An Analysis of COVID-19 and SARS

This study analyzes the impact of SARS and COVID-19, the two most severe epidemics to occur in China since the 21st century, on corporate innovation, in order to find a path for sustained innovation growth under the epidemic. For COVID-19, the analysis used data from China’s A-share-listed companies from 2019 to 2020; a longer period (1999–2006) and a wider sample of Chinese industrial enterprises were used for the SARS epidemic. The empirical model was constructed using the difference-in-differences method. Both COVID-19 and SARS were found to have significantly reduced enterprise innovation. However, the effect of SARS disappeared after two years. For COVID-19, information asymmetry, financing constraints, and economic policy uncertainty moderated the epidemic’s effect on innovation. The results show that financing constraints and economic policy uncertainty reduce the epidemic’s negative impact. However, while most previous studies have found that an epidemic reduces the information asymmetry between investors and enterprises in the short term, thus raising enterprise innovation, we found that information asymmetry aggravated the epidemic’s negative impact. These findings can be applied to alleviate the current epidemic’s negative impact as well as improve enterprise innovation thereafter.