Corporate Innovation in the Cyber Age
52 Pages Posted: 10 Apr 2020 Last revised: 1 Sep 2021
Date Written: September 1, 2021
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: Suggested Citation