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Market-Based Solutions to Vital Economic Issues

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Market-Based Solutions to Vital Economic Issues
Research
Jul 19, 2019

Deterrent Disclosure

Abstract

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 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 a differences-in-differences design. Consistent with patent disclosures successfully 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, which is consistent with firms using the disclosure of innovation to deter product market competition.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.


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