Persistence of Politicians and Firms' Innovation

31 Pages Posted: 20 Feb 2011

See all articles by Giorgio Bellettini

Giorgio Bellettini

University of Bologna - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Carlotta Berti Ceroni

University of Bologna - Department of Economics

Giovanni Prarolo

University of Bologna; University of Milan - Centro Studi Luca d'Agliano (LdA)

Multiple version iconThere are 3 versions of this paper

Date Written: February 16, 2011

Abstract

We empirically investigate whether the persistence of politicians in political institutions affects the innovation activity of firms. We use 12,000 firm-level observations from three waves of the Italian Observatory over Small and Medium Enterprises, and introduce a measure of political persistence defined as the average length of individual political careers in political institutions of Italian municipalities. Standard OLS shows no raw correlation between political persistence and firms’ innovation activity. However, once the causal effect is isolated by means of instrumental variables, using death of politicians as an exogenous source of variation of political persistence, we find a robust negative relation between political persistence and the probability of process innovation. This finding is consistent with the view that political stability may hinder firms’ incentive to innovate to maintain their competitiveness, as long as they can extract rents from long-term connections with politicians.

Keywords: innovation, politicians, tenure, instrumental variable

JEL Classification: D220, D720, O310

Suggested Citation

Bellettini, Giorgio and Berti Ceroni, Carlotta and Prarolo, Giovanni, Persistence of Politicians and Firms' Innovation (February 16, 2011). CESifo Working Paper Series No. 3350, Available at SSRN: https://ssrn.com/abstract=1762581

Giorgio Bellettini

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
I-40126 Bologna
Italy
+39 051 2098136 (Phone)
+39 051 2098040 (Fax)

HOME PAGE: http://sites.google.com/site/giorgiobellettiniwebpage/

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Carlotta Berti Ceroni

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
I-40126 Bologna
Italy
+39 051 2098017 (Phone)
+39 051 2098040 (Fax)

Giovanni Prarolo (Contact Author)

University of Bologna ( email )

Piazza Scaravilli 2
Bologna, 40100
Italy

HOME PAGE: http://www2.dse.unibo.it/prarolo/

University of Milan - Centro Studi Luca d'Agliano (LdA) ( email )

Via P. Amedeo 34
Milano, Mi 20122
Italy

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