IDEAS home Printed from https://ideas.repec.org/a/taf/rcjaxx/v5y2017i4p449-467.html
   My bibliography  Save this article

Value effect of rival innovation failure: competition or contagion?

Author

Listed:
  • Haoping Xu
  • Xin Zhang
  • Lu Liu
  • Jianqiao Hong

Abstract

This paper investigates how the value of firms is affected by rival R&D projects. In particular, we utilise a unique event (i.e. the failure of the R&D project in Hepatic vaccine in Chongqing Brewery) to investigate the market response to the announcement of failure in R&D investment in a rival firm. The competition (contagion) hypothesis predicts a positive (negative) market reaction. Our results show a strong negative market reaction, indicating that the contagion effect dominates the scene. We also show that the negative effects are more pronounced in firms with core business in the vaccine industry, reinforcing our main evidence supporting the contagion effect. Moreover, our evidence suggests that such an effect is more pronounced in firms with a higher degree of uncertainty. Our study has important contributions to the literature as well as policy implications.

Suggested Citation

  • Haoping Xu & Xin Zhang & Lu Liu & Jianqiao Hong, 2017. "Value effect of rival innovation failure: competition or contagion?," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 5(4), pages 449-467, October.
    • Handle: RePEc:taf:rcjaxx:v:5:y:2017:i:4:p:449-467
    DOI: 10.1080/21697213.2017.1423777
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/21697213.2017.1423777
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/21697213.2017.1423777?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:rcjaxx:v:5:y:2017:i:4:p:449-467. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rcja .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.