Abstract
This paper examines the role of local attitudes towards gambling on corporate innovative activity. Using a county’s Catholics-to-Protestants ratio as a proxy for local gambling preferences, we find that firms located in gambling-prone areas tend to undertake riskier projects, spend more on innovation, and experience greater innovative output. We contrast the local gambling effect with CEO overconfidence, another behavioral effect reported to influence innovation. We find that local gambling preferences are a stronger determinant of innovative activity, with CEO overconfidence being more relevant to innovation in areas where gambling attitudes are strong.
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