Economic policy uncertainty and innovation decoupling: evidence from Chinese listed high-tech firms

Purpose Amid escalating economic policy uncertainty (EPU), firms' innovation decisions are shaped by a fundamental conflict between efficiency logic and legitimacy logic. From an efficiency perspective, rising EPU increases uncertainty surrounding technological trajectories and innovation pathways, making firms more cautious about expanding substantive innovation investment. From a legitimacy perspective, however, innovation has become an increasingly salient social expectation, especially for high-tech firms. Under resource constraints and financing pressure, firms may therefore need to maintain an innovation-oriented posture to secure stakeholder support. Drawing on institutional decoupling theory, this study examines whether and how EPU reshapes the internal structure of firms' innovation behavior by inducing a decoupling between innovation disclosure and substantive innovation investment. Design/methodology/approach Using a sample of Chinese listed high-tech firms from 2013 to 2023, this study empirically examines whether EPU increases innovation decoupling. It further investigates whether firms adjust the forward-looking orientation of innovation disclosures as a strategic communication and impression management response. In addition, the study examines the economic consequences of innovation decoupling, including its effects on innovation quality and capital market information efficiency, and explores the boundary conditions under which such decoupling is strengthened or constrained, including regulatory environments and firm characteristics. Findings The results show that EPU significantly increases firms' innovation narrative disclosure without a commensurate increase in substantive innovation investment, leading to a structural decoupling between innovation disclosure and innovation action. Firms further increase the proportion of forward-looking content in their innovation disclosures, suggesting that future-oriented narratives may help redirect stakeholder attention from current innovation input to future innovation potential. Analyses of the consequences show that innovation decoupling under EPU reduces innovation quality and increases analysts' forecast bias and dispersion. Finally, stronger regulatory inquiry, a more effective judicial environment, and greater media attention significantly constrain firms' reliance on innovation decoupling under EPU, whereas the effect is stronger among non-manufacturing and younger high-tech firms. Originality/value This study shifts the EPU–innovation literature from a focus on innovation levels to a focus on innovation structure. By distinguishing innovation disclosure from substantive innovation investment, it reveals how macro-level uncertainty can induce a structural imbalance in firms' innovation behavior. The study also extends research on forward-looking disclosure by highlighting its strategic communication and impression management functions in an innovation decoupling context, and provides evidence on the innovation and capital market consequences of such decoupling.