The Role of Economic Stability in Promoting Innovation: Implications of Terrorism

Although terrorism’s influence on financial development has been broadly observed, the nexus between innovation and terrorism remains unsatisfactorily explored in the prevailing literature. This investigation seeks to address this gap by empirically and theoretically inspecting the influence of terrorism on innovation activities. By utilizing a panel dataset covering 57 states with the time span of 1985–2023, the investigation utilizes quantile regression, system generalized method of moments (GMM), and ordinary least squares (OLS) approaches. The empirical outcomes show that terrorism exercises a statistically substantial and unfavorable influence on innovation. These outcomes are further corroborated through a sequence of soundness tests. Moreover, the research recognizes numerous transmission networks — namely trade openness, domestic investment, and foreign direct investment — with how terrorism influences innovation. The findings of this investigation propose appreciated policy implications intended at nurturing ecological innovation and augmenting the total insight of the terrorism-innovation association.