Product Liability Litigation and Innovation: Evidence from Medical Devices

Alberto Galasso and Hong Luo

American Economic Journal: Microeconomics, 2026, vol. 18, issue 3, 481-513

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.

JEL-codes: D83 K13 L64 O31 O34 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/mic.20240255

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