Endogenous Social Effects on Corporate Research and Development

50 Pages Posted: 2 Jul 2019 Last revised: 17 Aug 2021

See all articles by Dien Giau Bui

Dien Giau Bui

Yuan Ze University

Yehning Chen

National Taiwan University

Chih-Yung Lin

National Yang-Ming Chiao Tung University

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Date Written: July 1, 2019

Abstract

We examine endogenous social effects proposed by Manski (1993) on corporate research and development (R&D) spending. Using state-level enactments of the Uniform Trade Secrets Act as exogenous shocks, we find that focal high-tech firms respond positively to peers’ R&D expenditures. We find no results in falsification tests based on placebo law changes, with capital expenditures as dependent variable, or with placebo peers. Moreover, the results are stronger with higher economic policy uncertainty, higher firm risk, smaller market capitalization, tighter financial constraints, and a higher R&D quantile. Finally, our results are robust to various regression setups and alternative definitions of peers.

Keywords: R&D; endogenous social effects; peer effect, trade secret legal protection, high-tech firms, capital expenditure

JEL Classification: G31, G32, G34, G41

Suggested Citation

Bui, Dien Giau and Chen, Yehning and Lin, Chih-Yung and Lin, Tse-Chun, Endogenous Social Effects on Corporate Research and Development (July 1, 2019). Available at SSRN: https://ssrn.com/abstract=3412770 or http://dx.doi.org/10.2139/ssrn.3412770

Dien Giau Bui

Yuan Ze University ( email )

135, Far-East Rd., Chung-Li
Taoyuan, ROC
Taiwan

Yehning Chen

National Taiwan University ( email )

1 Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

Chih-Yung Lin

National Yang-Ming Chiao Tung University ( email )

National chiao tung university, 1001 university ro
Hsinchu, 1001
Taiwan

Tse-Chun Lin (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

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