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Supply network and firm innovation: Evidence from China

Author

Listed:
  • Deng, Xiao
  • He, Shi-Ting
  • Lin, Xinrui
  • Tang, Junjie

Abstract

Successful innovations not only hinge on the firm's internal characteristics, but also closely relate to its involvement in supply networks. Unlike most previous studies that focus on the ego network surrounding a focal firm, our study expands the view to the entire nationwide supply network and investigates how a firm's network centrality facilitates its innovations. Leveraging a novel dataset on inter-firm relationships, we trace the evolution of the supply network among Chinese firms from 2007 to 2021. Our analysis demonstrates that firms with higher network centrality tend to devote more efforts to innovation and acquire more innovation outputs. Centrally positioned firms enjoy enhanced access to external financing and valuable information sharing. These advantages have contributed to the recent increase in internal innovation efforts by Chinese firms to mitigate the impact of U.S. economic sanctions.

Suggested Citation

  • Deng, Xiao & He, Shi-Ting & Lin, Xinrui & Tang, Junjie, 2026. "Supply network and firm innovation: Evidence from China," China Economic Review, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:chieco:v:95:y:2026:i:c:s1043951x25002597
    DOI: 10.1016/j.chieco.2025.102601
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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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