The Interaction Effect of Text-Based Corporate Innovation and Economic Policy Uncertainty on Firm Performance

Nattarinee Denlertchaikul, Pattanaporn Chatjuthamard, Pornsit Jiraporn and Piyachart Phiromswad

SAGE Open, 2022, vol. 12, issue 4, 21582440221139452

Abstract: Prior research shows that corporate innovation enhances firm value. Using a novel text-based measure of corporate innovation, we explore how the effects of corporate innovation on firm performance change in the presence of economic policy uncertainty. We use a large sample of US firms over the period 1996 to 2010 to test the relationship by executing firm-fixed effect regressions. Our results show that corporate innovation significantly positively affects firm performance. However, our results also reveal that the favorable effect of corporate innovation on firm value is reduced substantially in times of greater economic policy uncertainty. The latter result highlights the urgent need for policymakers to maintain the long-term consistency of economic policies to encourage firms’ innovative activities. Several robustness checks including three proxies for firm performance and four instrumental-variable analyses confirm our original results. JEL Classification : E66, O31, G32

Keywords: innovation; text-based corporate innovation; economic policy uncertainty; firm value; firm performance (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/21582440221139452 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:12:y:2022:i:4:p:21582440221139452

DOI: 10.1177/21582440221139452

Access Statistics for this article

More articles in SAGE Open
Bibliographic data for series maintained by SAGE Publications ().