Technology Spillover and Corporate Technology Disclosures

54 Pages Posted: 6 Feb 2016 Last revised: 9 Mar 2019

See all articles by Michael Ettredge

Michael Ettredge

University of Kansas - Accounting and Information Systems Area

Feng Guo

Iowa State University - Department of Accounting and Finance

Ling Lei Lisic

Virginia Polytechnic Institute & State University - Pamplin College of Business

Kevin Tseng

Federal Reserve Bank of Richmond

Date Written: December 1, 2018

Abstract

In modern economies, technological knowledge can flow between firms through various channels. We test an economic theory that firms most likely to benefit from such knowledge flows disclose information about their technologies more readily, probably to attract technologically compatible counterparties. Consistent with theory, we find that greater potential value of knowledge flows to a focal firm, which we refer to as “technology spillover”, is associated with the firm’s voluntary disclosure of more R&D-related information in 10-K reports. We control for firm fixed effects and employ quasi-exogenous shocks to states’ R&D tax laws to enhance the inference of causality. In additional analyses, we find that firms subject to greater technology spillover are less likely to redact information from technology-related contracts filed with the Securities and Exchange Commission. Because the proprietary cost theory predicts that product market rivalry should be negatively associated with disclosures that aid rival firms, we control for product market rivalry in all analyses. Therefore, we demonstrate that the positive effects of technology spillover on the quantity and details of technology-related disclosures co-exist with the more familiar negative effects of proprietary costs.

Keywords: disclosure, technology, knowledge spillover, proprietary costs, redaction

JEL Classification: G14, L1, M40, M41

Suggested Citation

Ettredge, Michael L. and Guo, Feng and Lisic, Ling Lei and Tseng, Kevin, Technology Spillover and Corporate Technology Disclosures (December 1, 2018). Available at SSRN: https://ssrn.com/abstract=2727933 or http://dx.doi.org/10.2139/ssrn.2727933

Michael L. Ettredge (Contact Author)

University of Kansas - Accounting and Information Systems Area ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States
785-864-7537 (Phone)
785-864-5328 (Fax)

Feng Guo

Iowa State University - Department of Accounting and Finance ( email )

College of Business
Ames, IA 50011-2063
United States

Ling Lei Lisic

Virginia Polytechnic Institute & State University - Pamplin College of Business ( email )

1016 Pamplin Hall
Blacksburg, VA 24061
United States

Kevin Tseng

Federal Reserve Bank of Richmond ( email )

530 East Trade St
Charlotte, NC 28202
United States
704-358-2110 (Phone)

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