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Import risk and directed innovation

This project will study a new factor determining innovation decisions: the role of country-risk in regions where firms source from, especially for less substitutable goods. Determinants of innovation behavior by firms and individuals are not fully understood yet. Economists have focused on the role of fiscal incentives, and, to some extent, demographic characteristics of firms (age, tenure, location). This project intends to study the effect of (political, climate, natural or economic) risk fluctuations in countries where companies source from on innovation behavior for domestic corporations. In particular, it will try to evidence and quantify the response of domestic innovation when firms are confronted with increased risk in their import supply source, especially for non-substitutable goods: critical raw materials, highly differentiated manufactured goods. The project plans to measure import-induced country-risk exposure at the firm-level, and to test whether more exposed firms respond via increased innovation efforts.