When Do Analysts Impede Innovation?*

39 Pages Posted: 21 Nov 2015

See all articles by Jonathan Clarke

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business

Nishant Dass

Georgia Institute of Technology - Scheller College of Business

Ajay Patel

Wake Forest University, School of Business

Date Written: October 1, 2015

Abstract

We re-examine the impact of analyst coverage on firm innovation and find that the negative relation between analyst coverage and innovation is driven by firms that are poor-quality innovators. In contrast, analysts do not hinder innovation in firms that are efficient innovators. These findings are robust when considering two different identification strategies that control for endogeneity. Our results hold for both innovation output (patents) and innovation input (R&D). Overall, our main findings indicate that analysts curtail wasteful innovation and play a beneficial role in resource allocation in the economy.

Keywords: Analysts, Innovation, Patents

JEL Classification: G14, G30, O32

Suggested Citation

Clarke, Jonathan and Dass, Nishant and Patel, Ajay, When Do Analysts Impede Innovation?* (October 1, 2015). Georgia Tech Scheller College of Business Research Paper No. 2015-16. Available at SSRN: https://ssrn.com/abstract=2693127 or http://dx.doi.org/10.2139/ssrn.2693127

Jonathan Clarke (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-4929 (Phone)
404-894-6030 (Fax)

HOME PAGE: http://mgt.gatech.edu/directory/clarke.html

Nishant Dass

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-5109 (Phone)

HOME PAGE: http://scheller.gatech.edu/dass

Ajay Patel

Wake Forest University, School of Business ( email )

1834 Wake Forest Road
Building 60, Farrell Hall
Winston-Salem, NC 27106
United States
336-758-5575 (Phone)
336-758-4514 (Fax)

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