How to enable firm innovation in a politically unstable environment?

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This thesis examines the relationship between political instability and firm innovation propensity in emerging economies. Subsequently, the ability of firm characteristics to mitigate the impacts of political instability on firm innovation in emerging economies is tested. Data from the World Bank Enterprise Survey has been combined with World Governance Indicator values to gain a better understanding of these concepts. A logistic regression formula was employed to evaluate the research question. The results reveal that political instability levels do not influence the likelihood of emerging economy firms being innovative. This result, however, is not robust when the measurement method of political instability is altered. Ensuing, this opens up a compelling debate on objective and subjective measurement methods for the degree of political instability. Furthermore, this thesis provides evidence that the firm characteristics of state ownership and managerial experience have neither a direct nor a moderating effect on firm innovation. The results indicate that international firms have a significantly higher propensity to innovate compared to domestic firms. Interestingly, this conclusion only holds in the more politically stable emerging economies as the advantages of international firms gradually disappear when volatility increases.
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