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Political Activism and Firm Innovation

Published online by Cambridge University Press:  07 February 2019

Alexei V. Ovtchinnikov ,
Syed Walid Reza  and
Yanhui Wu
Alexei V. Ovtchinnikov*
Affiliation:
Ovtchinnikov, ovtchinnikov@hec.fr, HEC Paris
Syed Walid Reza
Affiliation:
Reza, sreza@binghamton.edu, SUNY at Binghamton
Yanhui Wu
Affiliation:
Wu, sean.wu@qut.edu.au, Queensland University of Technology
*
Ovtchinnikov (corresponding author), ovtchinnikov@hec.fr
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Abstract

We hypothesize that political activism is valuable because it helps reduce political uncertainty, which, in turn, fosters firm innovation. We find that firms that support more politicians, winning politicians, politicians on congressional committees with jurisdictional authority over the firms’ industries, and politicians who join those committees innovate more. We employ a natural experiment to show a causal effect of political activism on innovation. We also show evidence of intra-industry and geographical political activism spillovers.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 55 , Issue 3 , May 2020 , pp. 989 - 1024
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2019

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Footnotes

We thank Bill Christie, Dave Denis, Art Durnev, Mara Faccio, Johan Hombert, Elena Loutskina, Ron Masulis, Clemens Otto, David Parsley, Jacob Sagi, Amit Seru, Alex Stomper, Philip Valta, and seminar participants at HEC Montreal, the University of Guelph, the University of Wyoming, and SUNY at Binghamton for helpful comments. The usual disclaimer applies.

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