Nominee

Competition laws and corporate innovation

Click here to read the full article online

We examine the impact of competition laws on innovation. We create a unique firm-level dataset on patenting activities that includes over 1.2 million firm-year observations, across 66 countries, from 1991 through 2015. Using a new, comprehensive 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 theWe examine the impact of competition laws on innovation. We create a unique firm-level dataset on patenting activities that includes over 1.2 million firm-year observations, across 66 countries, from 1991 through 2015. Using a new, comprehensive 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 1888-2015 period.