The Impact of the U.S. Export Administration Regulations on Chinese Enterprises’ Investment Portfolios

Amid escalating U.S. export control pressures, Chinese enterprises face critical strategic repositioning decisions while systematic evidence on their investment responses remains limited. This paper examines the impact of the U.S. export administration regulations (EAR) on Chinese enterprises’ investment portfolios, focusing on intra-firm and inter-firm investments. We find that after being included in the Entity List, Chinese regulated enterprises’ intra-firm investment decreases by 1.3%, while inter-firm investment increases by 4.1% compared to unregulated enterprises. Regulatory pressure triggers strategic portfolio reconfiguration through three channels: increasing supply chain risks force enterprises to strengthen inter-firm alliances; the decrease of institutional legitimacy prompts enterprises to reduce intra-firm investment to avoid institutional review; and operational efficiency loss enhances both real option-driven cooperation and asset specificity induced disinvestment. In addition, the impact is more pronounced for enterprises in high-tech industries. State-owned enterprises (SOEs), firms whose CEOs have a financial background, and firms with high government subsidies are more likely to increase intra-firm investment, whereas firms with high management compensation are more inclined to increase inter-firm investment. Furthermore, we examine the outcomes of different investment strategies of firms. We document that intra-firm investment decreases enterprises’ rate of return on investment but does not affect innovation performance. In contrast, inter-firm investment increases enterprises’ rate of return on investment and innovation performance. Therefore, under the pressure of export controls, enterprises are more inclined to choose inter-firm investment. This paper provides a generalizable theoretical basis for analyzing investment restructuring in emerging markets under regulatory uncertainty.