Uncertainty and Corporate Innovation: Evidence from Terrorist Attacks

50 Pages Posted: 12 Jun 2019 Last revised: 14 Nov 2019

See all articles by Eliezer M. Fich

Eliezer M. Fich

Drexel University - Department of Finance

Tung Duy Nguyen

University of Surrey

Dimitris Petmezas

University of Surrey - Surrey Business School

Date Written: November 13, 2019

Abstract

We examine the causal effects of uncertainty on corporate innovation by exploiting terrorist attacks. Counting victims to measure an attack’s strength, we find that as terrorism intensity increases, firms near the strikes exhibit declines in R&D spending, patenting, citations, patent originality, and innovation value. Nearby firms do not hire new inventors and their inventors tend to move to distant companies. These effects continue for up to three years after the attacks. Our findings suggest that terrorism curtails innovation by aggravating the economic uncertainty affecting firms near the attacks and by worsening the uncertainty about personal security faced by their employees.

Keywords: Uncertainty; Terrorism; Corporate Innovation; Patents; Citations; Inventor Productivity; Inventor Mobility; Employee Safety

JEL Classification: G41; J24; J28; J61; O30

Suggested Citation

Fich, Eliezer M. and Nguyen, Tung Duy and Petmezas, Dimitris, Uncertainty and Corporate Innovation: Evidence from Terrorist Attacks (November 13, 2019). Available at SSRN: https://ssrn.com/abstract=3394564 or http://dx.doi.org/10.2139/ssrn.3394564

Eliezer M. Fich (Contact Author)

Drexel University - Department of Finance ( email )

LeBow College of Business
3220 Market Street – 11th Floor
Philadelphia, PA 19104
(215) 895-2304 (Phone)

Tung Duy Nguyen

University of Surrey ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

Dimitris Petmezas

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 7XH
United Kingdom

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