Does political turnover stifle or stimulate corporate innovation?

This paper investigates how political turnover affects firm innovation activities. In contrast to the literature documenting negative effects of local leader turnover on innovation output, I find that uncertainty over provincial leader turnover encourages firm patent filings. Local leader changes cause, on average, an increase of approximately 3.4% firm patent filings. The turnover effect is stronger in state-owned enterprises, in firms located in provinces featured with worse business environment (with more government-dominated markets), in firms facing fierce market competition, and in firms subject to higher growth opportunities. My findings suggest that the real effects of local political uncertainty depend on firms’ ownership structure, business environment, market competition, and growth opportunities.