Co-Opetition and Disruption with Public Ownership

Abstract

Do mandatory disclosure requirements make public firms less disruptive and competitive? Not necessarily. We offer a new perspective showing that mandatory disclosure facilitates "co-opetition" --- a strategy of competing on some dimensions while avoiding competition on others. Co-opetition encourages disruption by making firms more profitable and lowering financing costs. However, it may undermine commitment to intermediately attractive investments, making the benefit of being public U-shaped in investment attractiveness. We provide evidence supporting the model's predictions. We show that the enactment of stricter mandatory disclosure requirements leads to higher markups and, simultaneously, to a U-shaped increase in innovation.

JEL Classification: G31, G32, L41, O31