Geopolitical Tensions with the US Accelerate Chinese Firms’ Leveraging of Science

Key Takeaways

• Research Question: How do firms reconfigure their engagement with science when geopolitical restrictions disrupt access to established technology networks?
• Data: The study combines patent records, scientific publications, and US Entity List designations for mainland Chinese firms from 2010 to 2022.
• Method: The authors use staggered difference-in-differences to compare firms added to the Entity List with nonsanctioned firms over the same period. Matching, within-treated comparisons, and an instrumental-variable analysis provide additional robustness checks.
• Findings: Entity List designation is associated with a 72.3% increase in domestic science-linked patents. Among firms with a publication history, domestic and international scientific publications rise by amounts equal to 33.3% and 85.2% of their respective pretreatment means. The patenting response is stronger among firms that previously depended more heavily on US technology.
• Implications: Technology controls may redirect targeted firms from proprietary technology channels toward open science, helping them build internal research capacity under external constraints.

Background

Technology restrictions constrain targeted firms by cutting off critical inputs, proprietary know-how, and established technology networks. Their effect depends on whether firms can replace the knowledge they lose. Scientific research provides one possible route for adaptation. Published science remains broadly accessible and explains the mechanisms behind technological advances, helping firms decode complex technologies and search for alternative solutions.

This tension is central to US restrictions on Chinese firms. Placement on the Entity List limits access to covered US-origin technologies and can disrupt international collaboration and supply-chain relationships. At the same time, Chinese firms have been strengthening their scientific capabilities. The paper asks whether Entity List designation accelerates this shift by increasing firms’ use of science in patenting, their production of scientific research, and the breadth of the knowledge they source.

Data and Methodology

The authors construct a firm-year panel of Chinese companies from 2010 to 2022. Patent records from China and the United States identify inventions that cite scientific literature. Publication records from the China National Knowledge Infrastructure and Web of Science capture firms' contributions to domestic and international research. These data are combined with Entity List designations from the US Bureau of Industry and Security and financial information for publicly listed firms.

The analysis exploits differences in the timing of Entity List designation. A staggered difference-in-differences design compares changes within sanctioned firms with contemporaneous changes among firms that were not listed. Because targeted firms may differ systematically from other companies, the authors match them to firms with similar observable characteristics before designation. They also examine variation within sanctioned firms and use an instrumental-variable strategy that combines firms' historical exports to countries subject to extensive US restrictions with the strengthening of US export-control enforcement after 2017.

Findings

Sanctioned firms deepen their use and production of science

Following Entity List designation, firms produce an additional 0.337 domestic patents citing scientific literature per year. This represents a 72.3% increase relative to the pretreatment mean of 0.466. The increase also appears among patents granted to Chinese firms by the US Patent and Trademark Office.

Firms expand their own scientific research at the same time. Among companies with a publication history, the estimated increases in domestic and international publications equal 33.3% and 85.2% of their respective pretreatment means. The growth extends to publications in higher-impact journals. Sanctions are therefore associated with greater use of existing science in patenting and greater participation in scientific knowledge production.

The response is strongest among firms most exposed to US technology

The turn toward science is more pronounced when sanctions disrupt an important source of prior knowledge. For firms whose patent portfolios relied more heavily on US patents, the post-sanction increase is 0.596 science-linked patents per firm-year larger than for firms with lower dependence. This pattern connects the loss of established technological inputs to the search for knowledge in scientific research.

Government subsidy appears to support part of this adjustment. Among publicly listed firms, government subsidies partially mediate the increase in science-linked patenting, with clearer evidence among firms that depend more heavily on US technology or overseas revenue. The subsidy evidence is consistent with public funding supporting science-based adjustment, although subsidies account for only part of the overall response.

Firms broaden their search for scientific knowledge

Sanctions reshape where firms look for science. Targeted firms increase the number of patents citing Chinese, US, and other foreign research. Chinese science records the largest gain, while citations to US-produced science also rise in absolute terms. Firms strengthen domestic scientific connections without withdrawing from the international research system.

Their search also reaches further across time. After designation, firms cite older, potentially foundational research as well as more recent studies. Science offers both an account of the principles underlying existing technologies and a view of emerging technical possibilities. Access to this broader knowledge base gives constrained firms more material from which to develop alternative technological paths.

Implications

The paper highlights the role of science as a global public good in a fragmenting innovation system. When access to proprietary technology is curtailed, published research remains available as a foundation for understanding complex technologies and identifying alternative development paths. Firms with the capacity to use this knowledge can adapt to external constraints while remaining connected to research produced across borders.

Such adaptation may also reshape global innovation. Over time, it could foster more autonomous technological systems, intensifying competition while weakening integration across technology networks. Whether increased engagement with science ultimately produces commercial success or durable technological advantage remains unresolved.