Do Powerful Politicians’ Shocks Cause Changes in Corporate R&D Investment?

This paper explores whether powerful politicians' shocks cause changes in corporate R&D investment in the United States. The article employs an original hand-collected data on firms' R&D investment to sort firms into those connected to the powerful congress chairman's representing state and those that are not connected. The analysis shows that the powerful politician representing the state where big firms locate always self-selects to sit in powerful congress committees. Thus, the powerful politicians' shock may cause endogeneity problem in corporate R&D investment study with normal regression method. To correct for potential bias caused by this, entropy balancing matching method is proposed. Contrary to existing literature, the results show that no significant treatment effects on firm R&D investment can be observed and no causality can be claimed by employing powerful politicians' shocks as an identification strategy