Uncertainty and Corporate Innovation: Evidence from Terrorist Attacks
50 Pages Posted: 12 Jun 2019 Last revised: 14 Nov 2019
Date Written: November 13, 2019
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: Suggested Citation