Political Activism and Firm Innovation

Abstract

We hypothesize that political activism is valuable because it helps reduce political uncertainty, which, in turn, fosters firm innovation. We find that firms that support more politicians, winning politicians, politicians on Congressional committees with jurisdictional authority over the firms' industries, and politicians who join those committees innovate more. We employ a natural experiment to show a causal effect of political activism on innovation. We also show evidence of intra-industry and geographical political activism spillovers.

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

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