Social injustice and corporate innovation

We investigate the role of local social injustice, measured by racial prejudice and sexism, in corporate innovation. In a sample of U.S. firms, we find that local racial prejudice and sexism negatively affect corporate innovation. The results remain robust after the inclusion of other unobserved local factors. Furthermore, we find that the firms located in states with higher sexism levels continue to have lower corporate innovation outputs in the leading two and three years. The empirical findings imply that social injustice does not only have a social cost but also has economic consequences for firms. • State-level racial prejudice significantly reduces corporate innovation output. • State-level sexism highlights systemic gender-based barriers to innovation. • The "Missing Einsteins" concept explains systemic suppression of innovation potential.