An exploration on policy uncertainty as a driver of R&D activity

We explore the relationship between uncertainty in economic policy and R&D activity for the sample of 576 firms from seven countries in the world. We base our analysis on an index of newspaper-based economic policy uncertainty (EPU) following the approach of Baker et al.’s (2016). We observe a s...

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Bibliographic Details
Published in:Research in international business and finance 2023-01, Vol.64, p.101883, Article 101883
Main Authors: Nguyen, Quang, Kim, Huong Trang
Format: Article
Language:English
Subjects:
Economic policy uncertainty
Innovation
MNEs
R&D activity
Uncertainty
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Summary:We explore the relationship between uncertainty in economic policy and R&D activity for the sample of 576 firms from seven countries in the world. We base our analysis on an index of newspaper-based economic policy uncertainty (EPU) following the approach of Baker et al.’s (2016). We observe a significantly negative link between EPU and R&D intensity. Interestingly, the negative effect of policy uncertainty has less effect on the R&D activities of firms with growth opportunities. Finally, firms in politically sensitive industries respond stronger to EPU as far as R&D intensity is taken into account. •Explore the relationship between uncertainty in economic policy and R&D activity for a sample of 576 firms from seven countries.•Observe a significantly negative link between EPU and R&D intensity.•The negative effect of policy uncertainty has less effect on the R&D activities of firms with growth opportunities.•Firms in politically sensitive industries respond stronger to EPU as far as R&D intensity is taken into account.
ISSN:0275-5319
1878-3384
DOI:10.1016/j.ribaf.2023.101883