Deterrent Disclosure

We examine how product market competition affects the disclosure of innovation. Theory posits that product market competition can cause firms to increase their disclosure of innovation to deter product market competitors. Consistent with this reasoning, we find that patent applicants in more competi...

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Bibliographic Details
Published in:The Accounting review 2021-09, Vol.96 (5), p.291-315
Main Authors: Glaeser, Stephen A., Landsman, Wayne R.
Format: Article
Language:English
Subjects:
Applicants
Competition
Competitors
Disclosure
Innovations
Patent law
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Summary:We examine how product market competition affects the disclosure of innovation. Theory posits that product market competition can cause firms to increase their disclosure of innovation to deter product market competitors. Consistent with this reasoning, we find that patent applicants in more competitive industries voluntarily accelerate their patent disclosures, which are credibly disclosed via the United States Patent and Trademark Office. Our inferences are robust to using changes in industry-level import tariffs as sources of plausibly exogenous variation in product market competition in difference-in-differences designs. Consistent with patent disclosure deterring product market competitors, we find that timelier patent disclosures are more strongly associated with declines in the similarity of competitors' products than are less timely patent disclosures. In total, our results suggest that product market competition increases patent disclosure timeliness, which is consistent with firms using the disclosure of innovation to deter product market competition. JEL Classifications: D23; G38; O30; O31; O33; O34; O38.
ISSN:0001-4826
1558-7967
DOI:10.2308/TAR-2019-1050