Corporate Innovation in the Cyber Age

52 Pages Posted: 10 Apr 2020 Last revised: 1 Sep 2021

See all articles by Gabriele Lattanzio

Gabriele Lattanzio

Nazarbayev University

Yue Ma

University of Oklahoma

Date Written: September 1, 2021

Abstract

In this study, we use a text-based metric capturing firms’ ex-ante exposure to cybersecurity risk and document the rise of cyber threats as redesigning corporate innovation and appropriation strategies. As firms’ exposure to cybersecurity risk increases, managers’ reliance on trade secrets declines, as they seek to protect their firms’ intellectual capital under patent and intellectual property laws. In addition to this increase in patent activity, we determine that firms exposed to cyber threats file for simpler patents to accelerate their innovation cycle. Finally, we show that this strategic adjustment is not costless, as it causes firms’ returns to research and development (R&D) investments to decline significantly.

Keywords: Cyber risk, Cyber-attack, Corporate Innovation, Patents, Trade Secrets

JEL Classification: G14, G32, M15, M48, O32

Suggested Citation

Lattanzio, Gabriele and Ma, Yue, Corporate Innovation in the Cyber Age (September 1, 2021). SMU Cox School of Business Research Paper No. 20-04, Available at SSRN: https://ssrn.com/abstract=3559386 or http://dx.doi.org/10.2139/ssrn.3559386

Gabriele Lattanzio (Contact Author)

Nazarbayev University ( email )

Kazakhstan

Yue Ma

University of Oklahoma ( email )

Norman, OK 73019-4004
United States

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