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Product Liability, Research and Development, and Innovation

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  • Viscusi, W Kip
  • Moore, Michael J

Abstract

Product liability ideally should promote efficient levels of product safety but misdirected liability efforts may depre ss beneficial innovations. This paper examines these competing effects of liability costs on product R&D intensity and new product introductio ns by manufacturing firms. At low to moderate levels of expected liabil ity costs, there is a positive effect of liability costs on product innovation. At very high levels of liability costs, the effect is negative. At the sample mean, liability costs increase R&D intensity by 15 percent. The greater linkage of these effects to product R&D i s consistent with the increased prominence of the design defect doctrine. Copyright 1993 by University of Chicago Press.

Suggested Citation

  • Viscusi, W Kip & Moore, Michael J, 1993. "Product Liability, Research and Development, and Innovation," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 161-184, February.
  • Handle: RePEc:ucp:jpolec:v:101:y:1993:i:1:p:161-84
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    Blog mentions

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    1. "Changing the Malpractice System"
      by Mark Thoma in Economist's View on 2010-10-10 13:00:52

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    Cited by:

    1. Joshua Schwartzstein & Andrei Shleifer, 2013. "An Activity-Generating Theory of Regulation," Journal of Law and Economics, University of Chicago Press, vol. 56(1), pages 1-38.
    2. Alberto Cavaliere, 2004. "Product Liability in the European Union: Compensation and Deterrence Issues," European Journal of Law and Economics, Springer, vol. 18(3), pages 299-318, December.
    3. Etienne Pfister & Bruno Deffains & Myriam Doriat-Duban & Stéphane Saussier, 2006. "Institutions and contracts: Franchising," European Journal of Law and Economics, Springer, vol. 21(1), pages 53-78, January.
    4. Florian Baumann & Tim Friehe, 2015. "Optimal Damages Multipliers in Oligopolistic Markets," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 171(4), pages 622-640, December.
    5. Maria Arbatskaya & Maria Vyshnya Aslam, 2017. "Labeling Regulation or Product Liability? Managing Product Risks When Consumer Label-Reading Efforts Count," Emory Economics 1705, Department of Economics, Emory University (Atlanta).
    6. repec:nbr:nberch:14035 is not listed on IDEAS
    7. Jha, Ashish K. & Bose, Indranil & Ngai, Eric W.T., 2016. "Platform based innovation: The case of Bosch India," International Journal of Production Economics, Elsevier, vol. 171(P2), pages 250-265.
    8. Aschhoff, Birgit & Sofka, Wolfgang, 2009. "Innovation on demand--Can public procurement drive market success of innovations?," Research Policy, Elsevier, vol. 38(8), pages 1235-1247, October.
    9. Beckmann, Volker & Soregaroli, Claudio & Wesseler, Justus, 2010. "Ex-ante regulation and ex-post liability under uncertainty and irreversibility: governing the coexistence of GM crops," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 4, pages 1-33.
    10. Gérard Mondello & Evens Salies, 2016. "Tort Law under Oligopolistic Competition," GREDEG Working Papers 2016-29, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
    11. Julien Jacob & Sandrine Spaeter, 2016. "Large-Scale Risks and Technological Change: What About Limited Liability?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(1), pages 125-142, February.
    12. Fernandez, Linda & Dumas, Christopher F., 2009. "Cross-media pollution and fuels -- Can we avoid future MTBEs?," Energy Economics, Elsevier, vol. 31(3), pages 423-430, May.
    13. Takaoka, Sumiko, 2005. "The effects of product liability costs on R&D with asymmetric information," Japan and the World Economy, Elsevier, vol. 17(1), pages 59-81, January.
    14. Julien Jacob, 2011. "Innovation and diffusion in risky industries under liability law: the case of “double-impact” innovations," Working Papers of BETA 2011-24, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    15. Alison F. Del Rossi & W. Kip Viscusi, 2009. "The Changing Landscape of Blockbuster Punitive Damages Awards," American Law and Economics Review, Oxford University Press, vol. 12(1), pages 116-161.
    16. Florian Baumann & Klaus Heine, 2013. "Innovation, Tort Law, and Competition," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(4), pages 703-719, December.
    17. Yongmin Chen & Xinyu Hua, 2017. "Competition, Product Safety, and Product Liability," Journal of Law, Economics, and Organization, Oxford University Press, vol. 33(2), pages 237-267.
    18. Deffains, Bruno & Demougin, Dominique, 2008. "Customary versus technological advancement tests," International Review of Law and Economics, Elsevier, vol. 28(2), pages 106-112, June.
    19. repec:bin:bpeajo:v:29:y:1998:i:1998-3:p:107-148 is not listed on IDEAS
    20. John E. Ettlie, 1998. "R&D and Global Manufacturing Performance," Management Science, INFORMS, vol. 44(1), pages 1-11, January.
    21. Blind, Knut, 2012. "The influence of regulations on innovation: A quantitative assessment for OECD countries," Research Policy, Elsevier, vol. 41(2), pages 391-400.
    22. Alberto Galasso & Hong Luo, 2016. "Tort Reform and Innovation," NBER Working Papers 22712, National Bureau of Economic Research, Inc.
    23. Lerner, Josh, 1995. "Patenting in the Shadow of Competitors," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 463-495, October.

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