Product Liability Litigation and Innovation: Evidence from Medical Devices / Alberto Galasso, Hong Luo.

Format:

Book

Author/Creator:

Galasso, Alberto.

Contributor:

National Bureau of Economic Research.

Luo, Hong.

Series:

Working Paper Series (National Bureau of Economic Research) no. w32215.

NBER working paper series no. w32215

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2024.

Summary:

We examine the relationship between product liability litigation and innovation by systematically combining data on product liability lawsuits with data on new product introductions in a panel dataset of leading medical device firms. We first document a decline in the propensity to introduce new products for both defendant firms and other firms operating in litigated device categories. This decline, however, does not spill over to other device categories, and we also do not find any slowing down in firms' patenting activities. We then show that changes in two features of the regulatory environment---(1) the availability of public information regarding adverse events and (2) federal law taking precedence over state law---substantially affect the likelihood of litigation. These changes also provide quasi-exogenous variations in litigation that confirm our baseline findings. Finally, we show that litigation appears to induce firms to develop safer devices. Overall, our findings suggest that product liability litigation affects the rate and direction of technological progress, and that safety regulation and liability regimes interact with one another in significant ways.

Notes:

Print version record

March 2024.