An Empirical Analysis of the Impact of Economic Policy Uncertainty on Technological Innovation in Smart-Textiles: Evidence from Multi-Regional Manufacturing Firms
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Abstract
Smart textiles have become a key enabling technology for wearable electronics, flexible sensing, and intelligent electromagnetic information acquisition, making continuous technological innovation essential for the advancement of next-generation communication and sensing systems. However, innovation activities in this technology-intensive industry are highly sensitive to macroeconomic conditions and policy environments. This study empirically investigates the impact of Economic Policy Uncertainty (EPU) on technological innovation in smart-textile manufacturing firms using a panel dataset of 215 publicly listed companies from China, the United States, Germany, France, and the United Kingdom during 2010–2023. A firm fixed-effects model is employed to evaluate the relationship between country-level EPU and firm-level patent applications while controlling for financial and operational characteristics. The results indicate that elevated EPU significantly suppresses technological innovation, with a more pronounced negative effect on high-quality invention patents than on incremental innovations. Furthermore, the inhibitory effect is substantially stronger for smaller firms and enterprises facing greater financial constraints. These findings demonstrate that policy uncertainty weakens long-term research and development incentives in the smart-textile sector and may hinder the evolution of advanced wearable and sensing technologies. The study provides empirical evidence for innovation management under uncertain macroeconomic environments and offers useful references for promoting sustainable technological development in smart textiles supporting electromagnetic-enabled sensing and wireless information systems.
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