The study investigates the impact of collective empathy on corporate green innovation from the perspective of war heritage. Drawing on stakeholder theory and empathy theory, we argue that collective empathy fosters corporate green innovation by generating public emotional empathy toward local descendants of war victims and enhance cognitive empathy within firms regarding the environmental needs of local communities. Analyzing data from Chinese-listed firms in heavily polluting industries between 2010 and 2019, we find that collective empathy significantly encourages green innovation efforts. Mechanism analyses indicate that collective emotional and cognitive empathy serve as key pathways in this relationship. Furthermore, state-owned ownership and formal institutions reinforce and complement the positive effect of collective empathy on corporate green innovation

Based on data from 32 countries over the period 1996–2010, this paper is the first to assess the relationship between financial innovation, on the one hand, and bank growth and fragility, as well as economic growth, on the other hand. We find that different measures of financial innovation, capturing both a broad concept and specific innovations, are associated with faster bank growth, but also higher bank fragility and worse bank performance during the recent crisis. These effects are stronger in countries with larger securities markets and more restrictive regulatory frameworks. In spite of these seemingly ambiguous findings, our evidence points to a positive net effect of financial innovation on economic growth: financial innovation is associated with higher growth in countries and industries with better growth opportunities

We investigate how chief executive officers’ (CEOs) risk incentive (VEGA) affects firm innovation. To establish causality, we exploit compensation changes instigated by the FAS 123R accounting regulation in 2005 that mandated stock option expensing at fair values. Our identification tests indicate a positive and causal effect of CEOs’ VEGA on innovation activities. Furthermore, dampened managerial risk-taking incentive after the implementation of FAS 123R leads to a significant reduction in innovation related to firms’ core business and explorative inventions. It implies that managers diversify their innovation portfolios and decrease explorative inventions to curtail business risk when their risk-taking incentive is reduced

Justin Yifu Lin, Hybrid Rice Innovation in China: A Study of Market-Demand Induced Technological Innovation in a Centrally-Planned Economy, The Review of Economics and Statistics, Vol. 74, No. 1 (Feb., 1992), pp. 14-20

We present a general equilibrium model of the decisions of firms to innovate and to engage in international trade. We use the model to analyze the impact of a reduction in international trade costs on firms ’ process and product innovative activity. We first show analytically that if all firms export with equal intensity, then a reduction in international trade costs has no impact at all, in steady-state, on firms ’ investments in process innovation. We then show that if only a subset of firms export, a decline in marginal trade costs raises process innovation in exporting firms relative to that of non-exporting firms. This reallocation of process innovation reinforces existing patterns of comparative advantage, and leads to an amplified response of trade volumes and output over time. In a quantitative version of the model, we show that the increase in process innovation is largely offset by a decline in product innovation. We find that, even if process innovation is very elastic and leads to a large dynamic response of trade, output, consumption, and the firm size distribution, the dynamic welfare gains are very similar to those in a model with inelastic process innovation

We analyze the change in firms’ innovation behavior (short-term adjustment and long-term strategy) in reaction to the credit supply shock to banks in the recent financial crisis 2008/2009. Using a matched bank-firm data set for Germany, we utilize the exogenous variation caused by the interbank market disruptions on credit supply in instrumental variable estimations. Concerning the short-term innovation adjustment in 2009, our results show that (i) current innovation activities, (ii) the initiation of additional innovation and (iii) the reallocation of unused labor resources to the innovation department are affected by the shock to bank financing. We find that the effect is more pronounced for product innovation than for process innovation. Investigating the impact on the long-term innovation strategy in reaction to the crisis, we find that (iv) the sensitivity to adopting any innovation-related strategy to cope with the crisis could not be attributed to the negative bank credit supply shock

We examine the impact of government economic policy uncertainty (GEPU) on corporate innovation and identify a cost-of-capital transmission channel. We find that GEPU increases firms’ cost of capital, which translates into lower innovation. As economic policy uncertainty rises, firms with more exposure to such uncertainty face a higher weighted average cost of capital and innovate less. Innovations of financially constrained firms and firms relying on external finance in a competitive environment are affected more. Our study provides novel evidence that higher economic policy uncertainty hinders innovation not only through the traditional investment irreversibility channel, but also through the cost-of-capital channel

This paper studies the persistence of innovation in Dutch manufacturing using an unbalanced panel of firm data from four waves of the Community Innovation Survey between 1994 and 2002. We estimate by maximum likelihood a dynamic type 2 tobit model accounting for individual effects and handling the initial conditions problem. We find true persistence in the probability of innovating in the high-tech category of industries and spurious persistence in the low-tech category. Furthermore, past innovation output intensity affects, albeit to a small extent, current innovation output intensity in the high-tech category, while no such evidence is found in the low-tech category

The authors describe a model of general equilibrium with incomplete markets in which firms can innovate by issuing arbitrary, costly securities. When short sales are prohibited, firms behave competitively and equilibrium is efficient. When short sales are allowed, these classical properties may fail. If unlimited short sales are allowed, imperfect competition may persist even when the number of potential innovators is large. If limited short sales are allowed, perfect competition may obtain in the limit, but equilibrium can be inefficient because of the presence of an externality: the private benefits of innovation for firms differ from the social benefits

This paper uncovers that input tariff reductions result in less domestic innovation, but standard models of trade ensure a positive correlation between importing and innovation. Hence, the paper develops a dynamic framework with a task-specific laboraugmenting productivity and a non-homothetic import demand system to rationalize this finding. The model implies that input liberalization enables firms to use cheaper intermediate imports as a substitute for self-made inputs, a strategy that decreases marginal production costs but also discourages firms from investing in their own inhouse varieties. Finally, the paper compares the effectiveness of trade and innovation policies in boosting aggregate productivity growth