Does FX Hedging Actually Boost Innovation? | Dr. Sapnoti Eswar on Business Talk

In a recent deep-dive interview on the Business Talk podcast hosted by Deepak Bhatt, Dr. Sapnoti K. Eswar, Senior Lecturer in Finance at the University of St. Andrews Business School, unpacked her landmark Research Policy paper co-authored with Dr. Laura Dimitrova, exploring whether FX derivatives adoption directly drives technological innovation. Capitalizing on the exogenous shock of the 1987 ISDA Master Agreement, their research proves a causal link: firms with high pre-1987 foreign exchange exposure saw a roughly 12% increase in patent filings approximately three years after adopting FX derivatives. This boost is predominantly driven by equity-constrained firms that rely on steady cash flows to protect their R&D pipelines. Rather than fueling high-risk moonshots, hedging enables companies to fund incremental, compounding innovations. Ultimately, Dr. Eswar offers a crucial reframe for modern executives and boards: managing financial risk is not merely a defensive strategy, but a fundamental driver of a firm's capacity to invent and grow. This podcast is brought to you by Global Management Consultancy. Disclaimer: 1. The background music incorporated in this video is the intellectual property of its respective developer and is protected under applicable copyright laws. Notwithstanding that it is a free-to-use version, Business Talk, Global Management Consultancy, and Deepak Bhatt do not own, and expressly do not claim, any rights, title, or interest in or to this music. 2. Dr. Sapnoti Eswar shared key insights from her research, “Does Financial Innovation Lead to Technological Innovation? Evidence from Foreign Exchange Derivatives”, in an engaging episode of the Business Talk podcast. The uploaded video contains copyrighted content, so changing any graphics, music, or on-screen appearance of the author or host is not allowed.