The impact of international sanctions on innovation of target countries

This paper mainly presents a complete analysis of the impact of such sanctions on the innovation performance of target countries by exploiting the difference-in-differences method for panel data of 91 countries in the period 1988-2016. The empirical results confirm a significantly negative impact of overall international sanctions on innovation in the target countries; moreover, except for noneconomic sanctions, other types of sanctions have a negative impact on the level of innovation in the target countries to varying degrees. These findings are also supported by two semiparametric matchings: artificially matching according to the two factors of geographical location and land area respectively and the propensity score matching, one nonparametric matching: entropy balancing, as well as the system generalized method of moments estimates that account for any bias due to lagged dependent variables. This paper also shows that the significantly negative effect of international sanctions is manifested in the countries with high levels of trade openness, globalization, and democracy, but not in the countries with low levels of trade openness, globalization, and democracy. Our empirical findings merit particular attention from policy-makers in target countries.