Religion, Gambling Attitudes and Corporate Innovation

Using a county’s Catholics-to-Protestants ratio as a proxy for local gambling preferences, we find that firms headquartered in more gambling-tolerant areas tend to be more innovative, i.e. they obtain more and better quality patents. They do so partly by spending more on R&D, which makes their stock more lottery-like, a feature desired by investors who like gambling. These results are supported by several robustness tests and analyses of secondary implications. Gambling preferences of both investors and managers influence firms’ innovative endeavors and facilitate transforming their industry growth opportunities into firm value.Using a county’s Catholics-to-Protestants ratio as a proxy for local gambling preferences, we find that firms headquartered in more gambling-tolerant areas tend to be more innovative, i.e. they obtain more and better quality patents. They do so partly by spending more on R&D, which makes their stock more lottery-like, a feature desired by investors who like gambling. These results are supported by several robustness tests and analyses of secondary implications. Gambling preferences of both investors and managers influence firms’ innovative endeavors and facilitate transforming their industry growth opportunities into firm value.