Campus Units
Finance
Document Type
Article
Publication Version
Accepted Manuscript
Publication Date
4-2019
Journal or Book Title
Management Science
Volume
65
Issue
4
First Page
1455
Last Page
1947
DOI
10.1287/mnsc.2017.3002
Abstract
Corporate transparency reduces information asymmetries between firms and capital markets but increases the costs associated with information leakage to competitors. We explore how a country’s information environment affects innovation, an activity characterized by high information asymmetries and potentially severe proprietary costs. Studying both long-run cross-country differences in the availability of firm-specific information to corporate outsiders, as well as quasi-experimental shocks to the information environment following transparency-enhancing security market reforms, we document significantly higher rates of R&D and patenting in richer information environments. The effects of transparency are strongest in industries that rely on external equity rather than bank debt, indicating that transparency facilitates innovation by reducing the information costs associated with arm’s-length financing. In contrast, transparency has no impact on physical capital accumulation, consistent with fewer information asymmetries in tangible assets. An economy’s information environment has important but heterogeneous effects on the nature and extent of real economic activity.
Copyright Owner
INFORMS
Copyright Date
2019
Language
en
File Format
application/pdf
Recommended Citation
Brown, James R. and Martinsson, Gustav, "Does Transparency Stifle or Facilitate Innovation?" (2019). Finance Publication. 26.
https://lib.dr.iastate.edu/finance_pubs/26
Included in
Business and Corporate Communications Commons, Environmental Indicators and Impact Assessment Commons, Finance and Financial Management Commons, Operations and Supply Chain Management Commons
Comments
This accepted article is published as Brown, J.R., Martinsson, G., Does Transparency Stifle or Facilitate Innovation? Management Science April 2019; 65(4), 1600-1623. doi: 10.1287/mnsc.2017.3002. Posted with permission.