Cybersecurity risk and corporate innovation

Gabriele Lattanzio and Yue Ma

Journal of Corporate Finance, 2023, vol. 82, issue C

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.

Keywords: Cyber risk; Hacking; Corporate innovation; Patents; Trade secrets (search for similar items in EconPapers)
JEL-codes: G14 G32 M15 M48 O32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:82:y:2023:i:c:s0929119923000949

DOI: 10.1016/j.jcorpfin.2023.102445

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