Does oil price uncertainty impact corporate innovation? Insights from corporate culture

Abstract We examine the critical impact of oil price uncertainty on corporate innovation culture. We employ a unique measure of corporate innovation derived from textual analysis of earnings call transcripts, offering a more comprehensive perspective on innovation than traditional metrics like R&D expenditures and patents. The findings reveal a significant negative effect of oil price uncertainty on corporate innovation, indicating that firms tend to scale back innovation activities in response to heightened uncertainty. Since we account for overall economic uncertainty, the observed effect of oil price uncertainty on innovation is distinct and goes beyond the influence of general economic conditions. Importantly, firms where innovation is more critical to profitability experience a smaller decline in innovation when faced with oil price uncertainty. This research contributes to the understanding of how external economic factors, particularly oil price volatility, influence corporate innovation strategies and highlights the differential impact across firms based on the strategic importance of innovation.