Uncertainty and Corporate Innovation: Evidence from Terrorist Attacks

46 Pages Posted: 12 Jun 2019 Last revised: 14 Aug 2020

See all articles by Eliezer M. Fich

Eliezer M. Fich

Drexel University - Department of Finance

Tung Nguyen

Alliance Manchester Business School

Dimitris Petmezas

Durham University Business School

Date Written: August 13, 2020

Abstract

We examine the causal effects of uncertainty on corporate innovation by exploiting terrorism events. During the five-year window after terrorist attacks, firms near the strikes experience meaningful declines in R&D spending, patenting, citations, patent originality, and innovation value. These firms are more likely to have inventors move to distant companies but less likely to hire new inventors. These results prove robust to numerous controls including the influence of the 9/11 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 inventors.

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 and Petmezas, Dimitris, Uncertainty and Corporate Innovation: Evidence from Terrorist Attacks (August 13, 2020). 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 Nguyen

Alliance Manchester Business School ( email )

AMBS Crawford House
Booth Street West
Manchester, Greater Manchester, M15 6PB
United Kingdom

HOME PAGE: http://tung-dn.github.io/index.html

Dimitris Petmezas

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

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