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Does political turnover stifle or stimulate corporate innovation?

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  • Chen, Yinghui

Abstract

This paper investigates how political turnover affects firm innovation activities. In contrast to the literature documenting negative effects of local leader turnover on innovation output, I find that uncertainty over provincial leader turnover encourages firm patent filings. Local leader changes cause, on average, an increase of approximately 3.4% firm patent filings. The turnover effect is stronger in state-owned enterprises, in firms located in provinces featured with worse business environment (with more government-dominated markets), in firms facing fierce market competition, and in firms subject to higher growth opportunities. My findings suggest that the real effects of local political uncertainty depend on firms’ ownership structure, business environment, market competition, and growth opportunities.

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  • Chen, Yinghui, 2021. "Does political turnover stifle or stimulate corporate innovation?," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 1126-1145.
    • Handle: RePEc:eee:reveco:v:76:y:2021:i:c:p:1126-1145
    DOI: 10.1016/j.iref.2021.08.010
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    Cited by:

    1. Shi, Xing & Zhang, Ya & Wu, Yanrui & Wu, Huaqing, 2023. "Political turnover and firm innovation in China: The moderating role of innovation and entrepreneurship environment," Journal of Asian Economics, Elsevier, vol. 88(C).
    2. Xing Shi & Ya Zhang & Yanrui Wu & Huaqing Wu, 2023. "Political Turnover and Firm Innovation in China: The Moderating Role of Innovation and Entrepreneurship Environment," Economics Discussion / Working Papers 23-08, The University of Western Australia, Department of Economics.
    3. Yogeeswari Subramaniam & Nanthakumar Loganathan, 2022. "Uncertainty and technological innovation: evidence from developed and developing countries," Economic Change and Restructuring, Springer, vol. 55(4), pages 2527-2545, November.
    4. Ji, Xiaoqing & Liu, Shuai & Lang, Jingyi, 2022. "Assessing the impact of officials' turnover on urban economic efficiency: From the perspective of political promotion incentive and power rent-seeking incentive," Socio-Economic Planning Sciences, Elsevier, vol. 82(PB).
    5. Chen, Yinghui & Tong, Ying & Zhou, Can, 2024. "Non-mandatory approaches to corporate environmental engagement: Insights from the Belt and Road Initiative," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1287-1301.

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    More about this item

    Keywords

    Innovation; Patent filings; Political turnover; Growth options;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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