How Does the Uncertainty of Regulatory Policy in Exchange Rates Affect Firm Innovation Performance? Evidence From China

ABSTRACT By selecting A‐share listed companies in Shanghai and Shenzhen from 2007 to 2020 as the sample, this paper uses the ordinary least squares (OLS) method to empirically investigate the impact of the uncertainty of regulatory policy in exchange rates on firm innovation performance, as well as the moderating roles of organizational inertia and government subsidies. It is found that the uncertainty of regulatory policy in exchange rates positively affects firm innovation performance. Organizational inertia weakens the positive effect of the uncertainty of regulatory policy in exchange rates on firm innovation performance, and government subsidies strengthen the positive effect of the uncertainty of regulatory policy in exchange rates on firm innovation performance. Furthermore, through the heterogeneity analysis, we find that compared with high‐tech firms, the impact of the uncertainty of regulatory policy in exchange rates on innovation performance is more pronounced in non‐high‐tech firms. Organizational inertia strengthens the positive impact of the uncertainty of regulatory policy in exchange rates on innovation performance in high‐tech firms but weakens the positive impact of the uncertainty of regulatory policy in exchange rates on innovation performance in non‐high‐tech firms. Compared with non‐high‐tech firms, the positive moderating role of government subsidies between the uncertainty of regulatory policy in exchange rates and firm innovation performance is more significant in high‐tech firms.