American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Product Liability Litigation and Innovation: Evidence from Medical Devices
American Economic Journal: Microeconomics
(pp. 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.Citation
Galasso, Alberto, and Hong Luo. 2026. "Product Liability Litigation and Innovation: Evidence from Medical Devices." American Economic Journal: Microeconomics 18 (3): 481–513. DOI: 10.1257/mic.20240255Additional Materials
JEL Classification
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- K13 Tort Law and Product Liability; Forensic Economics
- L64 Other Machinery; Business Equipment; Armaments
- O31 Innovation and Invention: Processes and Incentives
- O34 Intellectual Property and Intellectual Capital