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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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    Cited by:

    1. Tan, Weijie & Guo, Binhua & Zhang, Qiantao, 2025. "Cybersecurity governance and corporate market value: Perspectives from investor trust and supply chain trust," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    2. 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).
    3. 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).
    4. Zhang, Huili & Huang, Yibo & Xu, Lei & Cui, Xuegang & Hu, Zhonghui, 2025. "University shareholding and corporate innovation: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 101(C).
    5. Gao, Lujia & Chen, Zhaoying & Zhao, Wei & Lai, Xuanyu, 2025. "Does cybersecurity regulation reduce corporate data-breach risk?," Finance Research Letters, Elsevier, vol. 78(C).
    6. 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).
    7. 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).
    8. Singh, Kuldeep & Chatterjee, Sheshadri & Mariani, Marcello & Wamba, Samuel Fosso, 2025. "Cybersecurity resilience and innovation ecosystems for sustainable business excellence: Examining the dramatic changes in the macroeconomic business environment," Technovation, Elsevier, vol. 143(C).
    9. Nong, Huihui & Lin, Yinghao & Zhang, Quankun, 2025. "Cybersecurity policy and corporate R&D investment," Finance Research Letters, Elsevier, vol. 75(C).
    10. Guohong, Zheng & Zhongwei, Xia & Feng, He & Zhongyi, Xiao, 2025. "The audit committee’s IT expertise and its impact on the disclosure of cybersecurity risk," Research in International Business and Finance, Elsevier, vol. 73(PA).
    11. Mauro Caselli & Edwin Fourrier-Nicolai & Andrea Fracasso & Sergio Scicchitano, 2024. "Digital Technologies and Firms’ Employment and Training," CESifo Working Paper Series 11056, CESifo.

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    More about this item

    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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