Negative Product Disclosure and Innovation
By: Colleen Cunningham (Utah) and Jennifer Kao (UCLA)
We investigate how negative product disclosure effects the rate and direction of subsequent innovation. In 2019, the U.S. Food and Drug Administration (FDA) terminated an adverse event reporting exemption for selected medical device product markets and released six million previously withheld adverse events. We find that innovation in affected device markets decreased by 17 percent, driven primarily by firms' responses to information about competitors' products rather than by the loss of their own ability to withhold information. The decline was attenuated in markets without close substitutes. Despite the overall reduction in innovation, firms introduced safer, higher quality devices and reallocated R&D toward unaffected markets. The number of R&D active firms in affected markets also fell. These findings show that large-scale negative product disclosure may decrease the rate of innovation but also may lead to safer and higher quality innovation.
Colleen Cunningham
Colleen Cunningham is an Assistant Professor of Entrepreneurship and Strategy at the University of Utah Eccles School of Business. She earned an undergraduate degree (Economics) from the University of British Columbia, a master’s degree (Economics) from Simon Fraser University, and a PhD from Duke University’s Fuqua School of Business. Her research focuses on the commercialization of innovation, and how transactions between firms and characteristics of the information environment help or hinder innovation outcomes. Her research has appeared in the Journal of Political Economy, Management Science, Strategic Management Journal, Strategy Science, and Academy of Management Journal. She has won several scholarly awards, including the 2023 Emerging Scholar Award from the Academy of Management Technology and Innovation Management division.
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