【公开学术报告】Text-Based Technological Risk and Firm Innovation: An Empirical Analysis

Text-Based Technological Risk and Firm Innovation: An Empirical Analysis

Guest Speaker:    Xuanqi LIU (NUS)

Date & Time: 9:30-11:00 (Beijing Time), Tuesday 19th, Dec 2023

Zoom Meeting: 91488423173（Password: 975846）

Click the Link: https://zoom.us/j/91488423173

 ABSTRACT

While innovation is a critical driver of firm success, firms face a variety of risks during the innovation. Technological risk, in particular, poses a significant challenge to innovation, as the rapid pace of technological change can make it challenging for firms to keep up with evolving consumer demands and preferences. Despite its importance, technological risk is rarely discussed due to the lack of a direct measure of firm level ex-ante technological risk. To fill this gap, we first propose a novel framework to construct firm-level technological risk measures using text-mining techniques on risk disclosures in 10-K reports. Subsequently, we examine the effect of technological risk on future innovation performance, as measured by patent counts and average patent citations. Our empirical results show that firms exposed to technological risk are more likely to improve innovation performance, i.e., increase their patenting activities and develop more impactful patents. In addition, we find that firms operating in highly competitive environments adopt more proactive innovation strategies to mitigate technological risks, while firms with a narrow technological knowledge base tend to focus on developing high-quality patents. Our study contributes to the growing information systems literature on employing novel machine learning methods for large-scale business analytics, corporate risk assessment literature, and corporate innovation literature. Our findings have important implications for corporate managers in developing innovation strategies, investors in risk assessment and financial regulators in regulating risk disclosure.

Key words: Technological risk, Textual analysis, Risk measurement, Firm innovation, Risk disclosure, Risk impact assessment