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

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  • Nguyen, Quang
  • Kim, Huong Trang

Abstract

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.

Suggested Citation

  • Nguyen, Quang & Kim, Huong Trang, 2023. "An exploration on policy uncertainty as a driver of R&D activity," Research in International Business and Finance, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:riibaf:v:64:y:2023:i:c:s0275531923000090
    DOI: 10.1016/j.ribaf.2023.101883
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    Cited by:

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    2. Suyi Zheng & Jiandong Wen, 2023. "How Does Firm-Level Economic Policy Uncertainty Affect Corporate Innovation? Evidence from China," Sustainability, MDPI, vol. 15(7), pages 1-23, April.

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    More about this item

    Keywords

    R&D activity; Economic policy uncertainty; Innovation; MNEs; Uncertainty;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F10 - International Economics - - Trade - - - General

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