The impacts of U.S. Section 337 investigations on Chinese technology firms

Abstract

This paper examines the valuation impact of investigations related to the alleged infringement of American intellectual property (IP) rights, specifically Section 337 investigations, on Chinese technology firms. Evidence suggests that the stock market responds negatively to announcements of Section 337 investigations in the short term; however, the long-term price impact varies significantly across firms. When focal firms actively formulate strategic adaptations, such as increasing R&D investments, diversifying international sales, and seeking government support, they enhance their dynamic capabilities, thereby fostering long-term value creation. Moreover, further analysis shows that state-owned enterprises (SOEs) underperform private firms in strategic adaptation and value creation, while firms without venture capital (VC) backing are also worse positioned than VC-backed firms.