The Effect of Political Risk on International Research Collaborations

In this paper, we examine how political risk affects the number of international research collaborations by exploiting the uncertainty surrounding the withdrawal of the United Kingdom (UK) from the European Union (EU), commonly referred to as Brexit. Specifically, we focus on the period after the UK declared the withdrawal but while the UK was still a full member of the EU. Our difference-in-differences analyses show that UK firms drastically decrease their international research collaborations by about 50 percent while other European firms increased international partnerships during the same time. In contrast, we do not find a similar decrease for UK research institutions. These findings illustrate that firms’ international research collaborations are substantially affected by macro risk factors.