Publications
Publications
- 2024
- HBS Working Paper Series
Product Liability Litigation and Innovation: Evidence from Medical Devices
By: Alberto Galasso and Hong Luo
Abstract
We examine the relationship between product liability litigation and innovation by systematically
combining data on product liability lawsuits with data on new product introductions in a panel dataset of
leading medical device firms. We first document a decline in the propensity to introduce new products for
both defendant firms and other firms operating in litigated device categories. This decline, however, does
not spill over to other device categories, and we also do not find any slowing down in firms’ patenting
activities. We then show that changes in two features of the regulatory environment—(1) the availability
of public information regarding adverse events and (2) federal law taking precedence over state law—
substantially affect the likelihood of litigation. These changes also provide quasi-exogenous variations
in litigation that confirm our baseline findings. Finally, we show that litigation appears to induce firms
to develop safer devices. Overall, our findings suggest that product liability litigation affects the rate
and direction of technological progress, and that safety regulation and liability regimes interact with one
another in significant ways.
Keywords
Lawsuits and Litigation; Product Development; Technological Innovation; Safety; Governing Rules, Regulations, and Reforms; Medical Devices and Supplies Industry
Citation
Galasso, Alberto, and Hong Luo. "Product Liability Litigation and Innovation: Evidence from Medical Devices." Harvard Business School Working Paper, No. 24-063, March 2024.