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Persistence of Politicians and Firms'Innovation

Author

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  • G. Bellettini
  • C. Berti Ceroni
  • G. Prarolo
Abstract
We empirically investigate whether the persistence of politicians in political institutions affects the innovation activity of firms. We use 12,000 firm-level observations from three waves of the Italian Observatory over Small and Medium Enterprises, and introduce a measure of political persistence defined as the average length of individual political careers in political institutions of Italian municipalities. Standard OLS shows no raw correlation between political persistence and firms' innovation activity. However, once the causal effect is isolated by means of instrumental variables, using death of politicians as an exogenous source of variation of political persistence, we find a robust negative relation between political persistence and the probability of process innovation. This finding is consistent with the view that political stability may hinder firms' incentive to innovate to maintain their competitiveness, as long as they can extract rents from long-term connections with politicians.

Suggested Citation

  • G. Bellettini & C. Berti Ceroni & G. Prarolo, 2010. "Persistence of Politicians and Firms'Innovation," Working Papers wp721, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp721
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    Cited by:

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    2. Fortuna Casoria & Marianna Marino & Pierpaolo Parrotta & Davide Sala, 2019. "Local Government and Innovation: the case of Italian provinces," Working Papers 1923, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    3. Xu, Gang & Yano, Go, 2017. "How does anti-corruption affect corporate innovation? Evidence from recent anti-corruption efforts in China," Journal of Comparative Economics, Elsevier, vol. 45(3), pages 498-519.
    4. Óscar Afonso & Pedro G. Lima & Tiago Sequeira, 2022. "The effects of automation and lobbying in wage inequality: a directed technical change model with routine and non-routine tasks," Journal of Evolutionary Economics, Springer, vol. 32(5), pages 1467-1497, November.

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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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