Does Terrorism Hamper Innovation Performance? Yes-New Empirical Evidence from South Asia Region

Abstract

The contemporary literature has argued multiple factors affecting the innovation performance of a country. However, the frequency of studies exploring the terrorism-innovation nexus is quite low. To fill this gap, the current study is another attempt that quantifies the impact of terrorism on innovation performance. For empirical analysis, we utilize the data of South Asian countries over the period 2000 to 2021 and check the regression among variables by employing ARDL (autoregressive distributed lag) model. The consistency of results was checked by including the control variables i.e., FDI inflow, foreign aid, and government subsidies, and by employing the alternative estimation technique i.e., FMOLS (fully modified ordinary least square) model. The analysis infers that terrorism has a significant but negative impact on both RDE (research and development expenditures) and TMA (trademark applications) jointly pronounced as innovation performance. The increase in military expenditures, market uncertainty, and administrative costs are some possible channels through which terrorism hampers innovation. In view of the findings, we can infer the “sand the wheel” role of terrorism in determining innovation. The vital policy implication of the current analysis is that significant efforts should be exerted to ensure peace, and non-state actors responsible for fragile conditions should be handled by iron hands. This study provides robustness to existing studies exploring the terrorism-innovation nexus and adds new thoughts to limited literature.