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  • 2019
  • Working Paper
  • HBS Working Paper Series

When Does Product Liability Risk Chill Innovation? Evidence from Medical Implants

By: Alberto Galasso and Hong Luo
  • Format:Print
  • | Language:English
  • | Pages:78
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Abstract

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 U.S. 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.

Keywords

Product Liability; Innovation; Tort; Medical Devices; Vertical Foreclosure; Legal Liability; Innovation And Invention; Laws And Statutes; Medical Devices And Supplies Industry

Citation

Galasso, Alberto, and Hong Luo. "When Does Product Liability Risk Chill Innovation? Evidence from Medical Implants." Harvard Business School Working Paper, No. 19-002, July 2018. (Revised July 2019.)
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About The Author

Hong Luo

Strategy
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Related Work

    • 2019
    • Faculty Research

    When Does Product Liability Risk Chill Innovation? Evidence from Medical Implants

    By: Alberto Galasso and Hong Luo
Related Work
  • When Does Product Liability Risk Chill Innovation? Evidence from Medical Implants By: Alberto Galasso and Hong Luo
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