PERSISTENCE OF POLITICIANS AND FIRMS' INNOVATION |
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| Authors: | GIORGIO BELLETTINI CARLOTTA BERTI CERONI GIOVANNI PRAROLO |
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| Institution: | 1. Bellettini: Department of Economics, University of Bologna, 40126 Bologna, Italy;2. CESifo, Munich, Germany. Phone +39 051 2098136, Fax +39 051 2098040, E‐mail giorgio.bellettini@unibo.it;3. Berti Ceroni: Department of Economics, University of Bologna, 40126 Bologna, Italy. Phone +39 051 2098017, Fax +39 051 2098040, E‐mail carlotta.berticeroni@unibo.it |
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| 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. 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. (JEL D22, D72, O31) |
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