When does Product Liability Risk Chill Innovation? Evidence from Medical Implants -- by Alberto Galasso, Hong Luo
- 01 октября 2018, 15:46
- NBER (National Bureau of Economic Research)
Liability laws designed to compensate for harms caused by defective products may also affect innovation. We examine this issue by exploiting a major quasi-exogenous increase in liability risk faced by US suppliers of polymers used to manufacture medical implants. Difference-in-differences analyses show that this surge in suppliers' liability risk had a large and negative impact on downstream innovation in medical implants, but it had no significant effect on upstream polymer patenting. Our findings suggest that liability risk can percolate throughout a vertical chain and may have a significant chilling effect on downstream innovation.
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