Coordinated Innovation: The Role of Product Development Disclosures

Abstract

This study explores the role of disclosures in facilitating coordinated innovation between supply chain partners. We argue that disclosures related to product development, referred to as "product disclosures," serve as a commitment device that mitigates the first-mover risk in coordination efforts, thereby facilitating coordinated innovation. We capture product disclosures from product-related press releases and measure coordinated innovation based on congruence in patent class vectors. Consistent with our hypothesis, we find a significantly positive association between product disclosures and coordinated innovation along the supply chain. This positive relation is more pronounced when coordination uncertainty is higher and information asymmetry is greater between supply chain partners. Our results are robust to two different instrumental variables approaches. We also find that coordinated innovation along the supply chain increases following a plausibly exogenous shock that enhances transparency in product development.

Keywords: innovation, patents, disclosure, product disclosure, supply chain, coordination

JEL Classification: D83, M41, O31, O32