Competition Laws and Corporate Innovation

54 Pages Posted: 19 Mar 2020 Last revised: 22 Sep 2020

See all articles by Ross Levine

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Lai Wei

Lingnan University - Department of Finance and Insurance

Wensi Xie

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Multiple version iconThere are 2 versions of this paper

Date Written: March 16, 2020

Abstract

We examine the impact of competition laws on innovation. We create a unique firm-level dataset on patenting activities that includes over 1.2 million firm-year observations, across 66 countries, from 1991 through 2015. Using a new, comprehensive dataset on competition laws, we find that more stringent competition laws (laws designed to intensify competition) are associated with increases in the number, impact, and explorative nature of firms’ patents. The innovative-enhancing effects of competition laws are stronger among firms that are better positioned to access external finance to invest in innovation, e.g., less financially constrained and publicly listed firms. The innovative-enhancing effects are smaller among family controlled firms, where the family tends have a large proportion of its wealth concentrated in the firm and is correspondingly more averse to the firm making risky investments in innovation. Our results also hold when using a country-industry dataset covering 186 countries over the
1888-2015 period.

Keywords: Innovation, Technological Change, Antitrust law, Antitrust policies

JEL Classification: O31; O34; K21; L4

Suggested Citation

Levine, Ross Eric and Lin, Chen and Wei, Lai and Xie, Wensi, Competition Laws and Corporate Innovation (March 16, 2020). Available at SSRN: https://ssrn.com/abstract=3555172 or http://dx.doi.org/10.2139/ssrn.3555172

Ross Eric Levine (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Chen Lin

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

Pokfulam Road
Hong Kong
China

Lai Wei

Lingnan University - Department of Finance and Insurance ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

Wensi Xie

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

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