Adapting Innovation When Facing Economic Uncertainty

56 Pages Posted: 23 Jun 2022

See all articles by Jeremiah Harris

Jeremiah Harris

Kent State University - Department of Finance

Dandan Liu

Kent State University

Xiaoling Pu

Kent State University - Department of Finance

Date Written: June 9, 2022

Abstract

This study provides evidence that firms adapt to macroeconomic, real, or financial economic uncertainty by decreasing their innovation activities. The way firms adapt is related to both internal factors such as patent types (exploratory versus exploitative patents), asset redeployability, patent assignments, and financial constraints, as well as external factors such as earnings pressure from myopic investors. The negative relationship with uncertainty is exaggerated by financial constraints and mitigated by redeployability while the detrimental effects of myopic investors on innovation are greatly dampened during periods of high economic uncertainty.

Keywords: Innovation, Economic Uncertainty, Redeployability, Myopic Investors

JEL Classification: O32, G3, G32

Suggested Citation

Harris, Jeremiah and Liu, Dandan and Pu, Xiaoling, Adapting Innovation When Facing Economic Uncertainty (June 9, 2022). Available at SSRN: https://ssrn.com/abstract=4119934 or http://dx.doi.org/10.2139/ssrn.4119934

Jeremiah Harris (Contact Author)

Kent State University - Department of Finance ( email )

College of Business Administration
P.O. Box 5190
Kent, OH 44242-0001
United States

Dandan Liu

Kent State University ( email )

Kent, OH 44242
United States
3396721095 (Phone)

Xiaoling Pu

Kent State University - Department of Finance ( email )

College of Business Administration
P.O. Box 5190
Kent, OH 44242-0001
United States

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