Uncertainty and Corporate Innovation: Evidence from Terrorist Attacks
46 Pages Posted: 12 Jun 2019 Last revised: 14 Aug 2020
Date Written: August 13, 2020
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
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