Drifting on a Calma Chicha after Countless Storms: How Macroeconomic Uncertainty Affects Firms

ARZA, VALERIA; GIULIANI, ELISA; NIERI, FEDERICA

Copenague

Conferencia; Conference Academy of International Business,; 2019

Elisa Giuliani a cargo de la presentaciónEmerging economies are subject to macroeconomic fluctuations and policy swings which generate firms? uncertainty about future behavior of key macroeconomic variables. Drawing on the theory of irreversible investments, we focus on innovation and suggest that macroeconomic uncertainty may be a core factor explaining why firms in developing countries struggle to innovate. Using micro data on Argentinean firms during the 1990s, we find that this is particularly the case for firms performing below their aspirations which may prefer defensive strategies to proactive ones, and for domestic firms, which, as opposed to subsidiaries of multinationals, cannot diversify their risk internationally.