This paper explores cycles in innovative outcomes corresponding with the timing of political turnover. Utilizing the data on local government officials and innovative activities at the firm level in China, a turnover in local political leaders is found to be negatively associated with innovation. We examine several potential explanations and find evidence supporting that political turnover reduces the incentives of firms to innovate until the uncertainty is resolved. This paper also indicates that local political turnover significantly holds back research and development investment, government subsidy, and the decision of expansion, leading to less innovative outcomes.

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Political Uncertainty

  • Weijie Luo

摘要

This paper explores cycles in innovative outcomes corresponding with the timing of political turnover. Utilizing the data on local government officials and innovative activities at the firm level in China, a turnover in local political leaders is found to be negatively associated with innovation. We examine several potential explanations and find evidence supporting that political turnover reduces the incentives of firms to innovate until the uncertainty is resolved. This paper also indicates that local political turnover significantly holds back research and development investment, government subsidy, and the decision of expansion, leading to less innovative outcomes.