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When trust breaks: Academic misconduct, innovation networks, and capital discrimination

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  • Hou, Jianxiang
  • Wang, Kebin
  • Wu, Tian

Abstract

We investigate how trust shocks affect innovation networks through an incomplete contracting framework. Using academic misconduct cases in China (2015–2021) as an identification strategy, we construct a comprehensive dataset combining patent activities and venture capital investments. We document three key findings. First, academic misconduct triggers persistent declines in university–industry collaboration, reducing both joint patents and citations to university research. Second, affected firms strategically shift toward inter-firm R&D alliances. Third, trust shocks propagate to capital markets, with venture capitalists reducing investments in firms previously linked to universities involved in misconduct. Our findings highlight trust as an irreplaceable mechanism in innovation governance and demonstrate how trust breakdowns reconfigure contractual relationships and resource allocation in innovation networks.

Suggested Citation

  • Hou, Jianxiang & Wang, Kebin & Wu, Tian, 2026. "When trust breaks: Academic misconduct, innovation networks, and capital discrimination," Journal of Corporate Finance, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:corfin:v:100:y:2026:i:c:s0929119926000738
    DOI: 10.1016/j.jcorpfin.2026.103015
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    JEL classification:

    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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