Abstract:This paper explores whether international trade frictions force Chinese firms to enhance innovative activities. Using global anti-dumping and anti-subsidy sanctions imposed on Chinese firms as exogenous shocks, we find that the innovative activities of Chinese firms increase significantly after they experience trade frictions. Moreover, the positive relationship between trade frictions and corporate innovation is more significant in more export-oriented firms, firms facing stronger competition and high-tech firms, suggesting that trade importance, competition pressure and high-tech feature motivate firms to engage more in corporate innovations in face of trade frictions. We also find that the reverse push effect of trade frictions on innovation is more pronounced in firms with more technical talents, in firms less financially constrained and in state-owned enterprises because these firms are equipped with more abundant innovative resources. Further analyses show that international trade frictions give rise to relatively high-quality innovations and this effect can last for four years. And boosting innovation activities help relieve the negative impact of trade frictions on firms’ export performance. Our research not only contributes the literature on corporate innovation and international trade fractions, but also can provide practice guidance for China’s transformation from a manufacturing giant to a manufacturing powerhouse. Besides, our conclusions may also offer theoretical implications for the recent heated discussions on how to cope with Sino-US trade fractions.