Working Paper: CEPR ID: DP13682
Authors: Alberto Galasso; Hong Luo
Abstract: We study the impact of consumers' risk perception on firm innovation. Our analysis exploits a major surge in the perceived risk of radiation diagnostic devices, following extensive media coverage of a set of over-radiation accidents involving CT scanners in late 2009. Difference-in-differences regressions using data on patents and FDA product clearances show that the increased perception of radiation risk spurred the development of new technologies that mitigated such risk and led to a greater number of new products. We provide qualitative evidence and describe patterns of equipment usage and upgrade that are consistent with this mechanism. Our analysis suggests that changes in risk perception can be an important driver of innovation and shape the direction of technological progress.
Keywords: Risk Perception; Innovation; Medical Devices; Product Liabilities
JEL Codes: O31; O32; O34; K13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased risk perception (D81) | increase in patenting activities related to RMT subclasses (O38) |
| increased risk perception (D81) | increase in new product introductions in FDA data for radiation diagnostic devices (O39) |
| increased risk perception (D81) | changes in innovation activities in radiation diagnostic devices (O39) |
| overradiation shock (L94) | decline in number of high-radiation procedures performed (L94) |
| overradiation shock (L94) | increase in propensity for hospitals to upgrade equipment (I11) |