How Do Natural Disasters Affect Regional Innovation?

ABSTRACT This study examines the effect of natural disasters on regional innovation in the United States between 1994 and 2018. Using a comprehensive dataset of patents and natural disasters at the county level, we employ a panel‐fixed‐effects model to estimate the causal impact of disasters on patent applications. Our findings reveal that natural disasters significantly hinder innovation, with patent applications decreasing by 2%–2.4% in 2–4 years after a disaster event. The results remain robust in alternative samples, specifications, and endogeneity tests using propensity score matching and placebo tests. The dynamic effects demonstrate a persistent decline in patenting over time, with no evidence of pretrends. In addition, we find that the negative impact of disasters on innovation is particularly pronounced in counties with lower levels of human capital and financial infrastructure. Our findings suggest that natural disasters disrupt regional innovation systems, divert resources, and impede technological progress.