Product Liability, Research and Development, and Innovation

W Viscusi and Michael J Moore

Journal of Political Economy, 1993, vol. 101, issue 1, 161-84

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.

Date: 1993
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