Beyond Physical Destruction: Typhoon Shocks, Innovation Retrenchment, and the Limits of Adaptive Capacity

ABSTRACT Using a comprehensive panel of Chinese A‐share listed firms from 2003 to 2024, this study investigates the causal impact of typhoon shocks on innovation performance and the heterogeneity of adaptive strategies. We find that typhoon shocks significantly suppress firms' innovation output by crowding out resources available for R&D and heightening perceptions of operational and managerial uncertainty. Our analysis of adaptive capacity reveals that while hardware‐based automation (industrial robots), government subsidies, and less competitive industry environments buffer the shock, artificial intelligence (AI) has yet to demonstrate significant resilience benefits. Furthermore, we identify a negative spillover effect where climate risks propagate through supply chain networks, amplifying vulnerabilities for downstream firms. These findings highlight the critical role of physical infrastructure resilience and supply chain coordination in sustaining long‐term competitiveness.