Reactive and Proactive: Firms’ Cross-Industry Innovation Under Geopolitical Risk

Rising geopolitical risks have become a defining feature of the global business environment, yet how firms—particularly those from latecomer economies—adjust their innovation strategies under such conditions remains insufficiently understood. Integrating resource dependence theory with the innovation ecosystem perspective, we propose that geopolitical risk induce firms to engage in cross-industry innovation as a strategic response to mitigate their reliance on international technological ecosystems, which traditionally provide cross-industry complementarities but are increasingly subject to disruption. Analyzing a panel of 12,354 Chinese listed manufacturing firms from 2012 to 2022, and employing fixed-effects negative binomial regression models implemented in Stata 18, we find that firms exposed to higher levels of perceived geopolitical risk are more likely to pursue innovations beyond their industry’s technological boundaries in subsequent years. This effect is weakened by industry technological complexity but strengthened by the firm’s nationalism, reflecting both reactive responses to external uncertainty and proactive efforts toward technological self-reliance. Our study contributes to innovation research by revealing how geopolitical forces reshape firms’ innovation trajectories and by extending resource dependence theory to the context of ecosystem-based interdependence. From a policy perspective, governments can promote rational and constructive nationalist narratives that encourage firms to commit to innovation in strategically vulnerable technologies.