Abstract

This analysis explores the complex relationship between innovation, uncertainty, and governance, demonstrating the impact of different types of uncertainty on corporate innovation and investment strategies. Utilizing a panel dataset comprising 548 publicly listed non-financial companies from 2003 to 2023, this study elucidates the varying impacts of economic policy uncertainty, climate policy uncertainty, and geopolitical uncertainty on corporate decision-making. The results demonstrate that economic policy uncertainty and geo-political uncertainty adversely affects corporate innovation, leading companies to frequently reduce their innovative efforts in times of economic instability. On the other hand, CPU has a positive impact on corporate investment, showcasing how companies adjust their strategies to capitalize on opportunities presented by changes in policy and geopolitical factors. Firms that implement strong governance structures exhibit enhanced resilience and adaptability, successfully managing uncertainties while promoting strategic investments.