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Cybersecurity risk and corporate innovation

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  • Lattanzio, Gabriele
  • Ma, Yue

Abstract

Using a text-based metric of firms' ex-ante exposure to cybersecurity risk, we document that the rise of cyber threats is 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 the umbrella provided by patent and intellectual property laws. In particular, we document that firms exposed to cyber threats file for simpler patents to accelerate their innovation cycle. This strategic adjustment is not costless, as it causes firms' returns to research and development (R&D) investments to decline significantly.

Suggested Citation

  • Lattanzio, Gabriele & Ma, Yue, 2023. "Cybersecurity risk and corporate innovation," Journal of Corporate Finance, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:corfin:v:82:y:2023:i:c:s0929119923000949
    DOI: 10.1016/j.jcorpfin.2023.102445
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    References listed on IDEAS

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    6. Xu, Gengxi & Li, Yugang & Liu, Shanshan & Ye, Zhuhong, 2026. "Cybersecurity risk and firm growth: Empirical evidence based on text analysis," The North American Journal of Economics and Finance, Elsevier, vol. 81(C).
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    8. Patel, Pankaj C., 2025. "Anchored by reliability, swayed by institutional forces: Cybersecurity risk deviance from industry norms and its contingencies on risk and volatility," Journal of Business Research, Elsevier, vol. 199(C).
    9. Tang, Rui & Li, Mingyu, 2026. "Cybersecurity and corporate resilience –a study based on listed companies in China," Technology in Society, Elsevier, vol. 84(C).
    10. Chang, Tsung-Sheng & Hsieh, Yao-Chian, 2024. "Applying the analytic hierarchy process for investigating key indicators of responsible innovation in the Taiwan software service industry," Technology in Society, Elsevier, vol. 78(C).
    11. Lee, Chien-Chiang & Wang, Chih-Wei & Lin, Weizheng & Chen, En-Jia, 2025. "Cyber risk and corporate share repurchases," International Review of Financial Analysis, Elsevier, vol. 103(C).
    12. Jin, Xianglan & Cui, Huizhu & Liu, Fengwei & Hu, Ziqiang & Cai, Yonghao, 2025. "Does cybersecurity regulation promote digital transformation? Evidence from the Cyber Security Law in China," Finance Research Letters, Elsevier, vol. 76(C).
    13. Abukari, Kobana & Dutta, Shantanu & Li, Chen & Tang, Songlian & Zhu, Pengcheng, 2024. "Corporate communication and likelihood of data breaches," International Review of Economics & Finance, Elsevier, vol. 94(C).
    14. Nong, Huihui & Lin, Yinghao & Zhang, Quankun, 2025. "Cybersecurity policy and corporate R&D investment," Finance Research Letters, Elsevier, vol. 75(C).
    15. Tang, Haodan & Liang, Jiaxuan & Fang, Senhui, 2024. "The innovation effect of digital M&As: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    16. Xu, Jing, 2025. "Cybersecurity governance and corporate innovation: evidence from China," Finance Research Letters, Elsevier, vol. 82(C).
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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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