Economic Sanctions, Military CEOS, and R&D Innovation Output: Evidence from Chinese-Listed Firms

Abstract

This study investigates the impact of sanctions on enterprises’ innovation, particularly focusing on firms whose CEOs have military experience. Using upper echelons theory and data combining the Commerce Control List with Chinese firm-level data, we propose and test several hypotheses regarding the influence of CEOs’ military experience on firms’ innovation under sanctions. The results reveal that sanctions lead to a decrease in innovation output. When the CEO has military experience, the innovation output of the company is increased. These findings highlight the significance of CEOs’ military experience in multinational enterprises (MNEs) in terms of their reaction to negative shocks, providing important implications for MNEs’ hiring strategies under different circumstances.

Keywords: Economic sanctions, Military experience, Innovation, Upper Echelons Theory, Multinational enterprise.