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Product Liability Litigation and Innovation: Evidence from Medical Devices

Author

Listed:
  • Alberto Galasso
  • Hong Luo

Abstract

We study the impact of product liability litigation on new product introductions by leading medical device firms. We find that the defendant firms, and other firms to a lesser extent, reduce their propensity to introduce new products in the litigated product categories during litigation years. We also show that changes to safety regulation influence the likelihood of litigation. Lastly, we show that the potential welfare loss due to litigation appears relatively contained: The decline in new product introductions is not permanent, it does not spill over beyond the litigated categories, and litigation induces firms to develop safer devices.

Suggested Citation

  • Alberto Galasso & Hong Luo, 2026. "Product Liability Litigation and Innovation: Evidence from Medical Devices," American Economic Journal: Microeconomics, American Economic Association, vol. 18(3), pages 481-513, August.
    • Handle: RePEc:aea:aejmic:v:18:y:2026:i:3:p:481-513
    DOI: 10.1257/mic.20240255
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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • L64 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Machinery; Business Equipment; Armaments
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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