Innovation and Idiosyncratic Risk: An Industry- and Firm-Level Analysis

Posted: 4 Aug 2008

See all articles by Mariana Mazzucato

Mariana Mazzucato

The Open University

Massimiliano Tancioni

Sapienza University of Rome, Department of Public Economics

Date Written: August 2008

Abstract

Recent studies find that idiosyncratic risk (IR) the degree to which firm-specific returns are more volatile than aggregate market returns has increased since the 1960s and attribute this to economy-wide factors such as the role of the IT revolution. Yet no innovation data is used in these studies. To gain further insights into the relationship between technology and IR, our aricle studies whether firms and industries that are more R&D intensive are in fact characterized by higher IR due to how innovation affects the uncertainty of expected future profits. While the industry-level results prove inconclusive, a clear relationship is found between firm-level R&D intensity and firm-level volatility of returns.

Suggested Citation

Mazzucato, Mariana and Tancioni, Massimiliano, Innovation and Idiosyncratic Risk: An Industry- and Firm-Level Analysis (August 2008). Industrial and Corporate Change, Vol. 17, Issue 4, pp. 779-811, 2008. Available at SSRN: https://ssrn.com/abstract=1194047 or http://dx.doi.org/dtn024

Mariana Mazzucato (Contact Author)

The Open University ( email )

Walton Hall
Milton Keynes, MK7 6AA
United Kingdom
+44 1908 659191 (Phone)
+44 1908 654488 (Fax)

HOME PAGE: http://www.open.ac.uk/socialsciences/staff/people-profile.php?name=Mariana_Mazzucato

Massimiliano Tancioni

Sapienza University of Rome, Department of Public Economics ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

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