Working Paper: NBER ID: w25401
Authors: T. Robert Fetter; Andrew L. Steck; Christopher Timmins; Douglas Wrenn
Abstract: In many industries firms can learn about new technologies from other adopters; mandatory disclosure regulations represent an understudied channel for this type of social learning. We study an environmentally-focused law in the shale gas industry to examine firm claims that disclosure requirements expose valuable trade secrets. Our research design takes advantage of a unique regulatory history that allows us to observe complete information on chemical inputs prior to disclosure, along with the timing of information availability for thousands of wells after disclosure takes effect. We find that firms’ chemical choices following disclosure converge in a manner consistent with inter-firm imitation and that this leads to more productive wells for firms that carefully choose whom to copy — but also a decline in innovation among the most productive firms, whose innovations are those most often copied by other firms. Our results suggest there is a long-run welfare trade-off between the potential benefits of information diffusion and transparency, and the potential costs of reduced innovation.
Keywords: mandatory disclosure; social learning; firm productivity; shale gas; chemical inputs
JEL Codes: L24; L51; L71; O3; Q35; Q53; Q55; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Convergence in chemical choices among firms (L65) | More productive wells (L71) |
| Mandatory information disclosure (G38) | Technology diffusion through interfirm learning (O36) |
| Technology diffusion through interfirm learning (O36) | Convergence in chemical choices among firms (L65) |
| Increased visibility of successful firms' innovations (O36) | Decline in innovation among most productive firms (O31) |
| Mandatory information disclosure (G38) | Higher productivity through chemical similarity (L65) |
| Convergence in chemical choices (L65) | Reduced experimental innovations among most productive firms (O31) |