Political Activism and Firm Innovation

59 Pages Posted: 25 Jul 2014 Last revised: 4 Feb 2015

See all articles by Alexei V. Ovtchinnikov

Alexei V. Ovtchinnikov

HEC Paris - Finance Department

Syed Walid Reza

SUNY at Binghamton

Yanhui Wu

Queensland University of Technology - School of Economics and Finance; Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: July 24, 2014


Political activism positively affects firm innovation. Firms that support more politicians, politicians on Congressional committees with jurisdictional authority over the firms’ industries and politicians who join those committees innovate more. We employ instrumental variables estimation and a natural experiment to show a causal effect of political activism on innovation. The results are consistent with the hypothesis that political activism is valuable because it helps reduce political uncertainty, which, in turn, fosters firm innovation. Also consistent with this hypothesis, we show that politically active firms successfully time future legislation and set their innovation strategies in expectation of future legislative changes.

Keywords: political contributions, innovation, investment policy, policy uncertainty

JEL Classification: D72, D80, G31, G38, O31, O38

Suggested Citation

Ovtchinnikov, Alexei V. and Reza, Syed Walid and Wu, Yanhui, Political Activism and Firm Innovation (July 24, 2014). HEC Paris Research Paper No. FIN-2014-1053, Available at SSRN: https://ssrn.com/abstract=2471058 or http://dx.doi.org/10.2139/ssrn.2471058

Alexei V. Ovtchinnikov (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351

Syed Walid Reza

SUNY at Binghamton ( email )

P.O. Box 6015
Binghamton, NY 13902-6015
United States

Yanhui Wu

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane

HOME PAGE: http://www.firn.org.au

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