Does oil price affect corporate innovation? Evidence from new energy vehicle enterprises in China

Abstract

The development of the new energy vehicle (NEV) industry to alleviate the global energy shortage and environmental pollution has attracted much attention. An econometric model is established to investigate the influence of oil price on innovation in new energy vehicle technologies, based on the induced-innovation theory. Taking advantage of enterprise-level panel data, the method of individual-fixed effect estimation is employed to capture time-invariant enterprise attributes in the analysis. We found that oil price spurs innovation in NEV enterprise, when controlling the influences of other factors, which is consistent with the theoretical hypothesis. The effect is substantively significant and robust. Further study implies that increasing research and development expenditure is a channel to increase innovation for enterprises when oil prices raise. Our findings are helpful to policymakers who are trying to understand the heterogeneity effects of oil price on NEV innovation. This paper suggests that central government should provide relevant policies and incentives to deal with price shocks, and enterprises should also have long-term plans to promote continuous corporate innovation.