Publications
Publications
- 2019
- HBS Working Paper Series
When Does Product Liability Risk Chill Innovation? Evidence from Medical Implants
By: Alberto Galasso and Hong Luo
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.)