Competition Law and Corporate Innovation

Ross LEVINE*, Chen LIN, Lai WEI, Wensi XIE

*Corresponding author for this work

Research output: Other Conference ContributionsPresentation

Abstract

We examine the impact of competition laws on innovation. We create a firm-level dataset on patenting activities that includes about 1 million firm-year observations, across 66 countries, from 1991 through 2011. Using a new dataset on competition laws, we find that more stringent competition laws (laws designed to intensify competition) are associated with increases in the number, impact, and explorative nature of firms’ patents. The innovative-enhancing effects of competition laws are stronger among firms that are better positioned to access external finance
to invest in innovation, e.g., less financially constrained and publicly listed firms. The innovative-enhancing effects are smaller among family-controlled firms, where the family tends have a large proportion of its wealth concentrated in the firm and is correspondingly more averse to the firm making risky investments in innovation. Our results also hold when using a country-industry dataset covering 186 countries over the 1888-2011 period.
Original languageEnglish
Publication statusPublished - 3 Jan 2021
EventAmerican Finance Association 2021 Annual Meeting - Virtual Meeting
Duration: 3 Jan 20215 Jan 2021
https://www.aeaweb.org/conference/2021/preliminary

Conference

ConferenceAmerican Finance Association 2021 Annual Meeting
Abbreviated titleAFA 2021
Period3/01/215/01/21
Internet address

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