Document Type

Thesis - Open Access

Award Date

2023

Degree Name

Master of Science (MS)

Department / School

Economics

First Advisor

Nacasius Ujah

Keywords

Firm Political Risk, R&D, Real Option, Strategic Growth Theory, Uncertainty

Abstract

I examine how firms make R&D investment decisions during periods of political uncertainty. To minimize stickiness and overly generalized assumptions, I employ quarterly data. I find that firms invest more in R&D when facing high levels of political risk. The results suggest that this positive relationship between political risk and R&D investment is more pronounced for competitive and politically sensitive firms. Additionally, the positive association is evident among firms with higher growth opportunities and more liquid assets. The results are robust to the test for correlation, addressing endogeneity, and alternative proxies adopted for the variables of interest. Overall, the findings of this study support the strategic growth option theory, which suggests that firms follow a preemptive strategy during periods of high uncertainty.

Publisher

South Dakota State University

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Included in

Finance Commons

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Rights Statement

In Copyright