Deleting unreported innovation

Ping Sheng Koh; David M. Reeb; Elvira Sojli; Wing Wah Tham; Wendun Wang

doi:10.1017/s0022109021000764

Deleting unreported innovation

Ping Sheng Koh, David M. Reeb^*, Elvira Sojli, Wing Wah Tham, Wendun Wang

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

6 Citations (Scopus)

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Abstract

The absence of observable innovation data for a firm often leads us to exclude or classify these firms as non-innovators. We assess the reliability of six methods for dealing with unreported innovation using several different counterfactuals for firms without reported R&D or patents. These tests reveal that excluding firms without observable innovation or imputing them as zero innovators and including a dummy variable can lead to biased parameter estimates for observed innovation and other explanatory variables. Excluding firms without patents is especially problematic, leading to false-positive results in empirical tests. Our tests suggest using multiple imputation to handle unreported innovation.

Original language	English
Pages (from-to)	2324 - 2354
Number of pages	31
Journal	Journal of Financial and Quantitative Analysis
Volume	57
Issue number	6
DOIs	https://doi.org/10.1017/s0022109021000764
Publication status	Published - 15 Sept 2022

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© 2022 The Author(s). Published by Cambridge University Press.

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AB - The absence of observable innovation data for a firm often leads us to exclude or classify these firms as non-innovators. We assess the reliability of six methods for dealing with unreported innovation using several different counterfactuals for firms without reported R&D or patents. These tests reveal that excluding firms without observable innovation or imputing them as zero innovators and including a dummy variable can lead to biased parameter estimates for observed innovation and other explanatory variables. Excluding firms without patents is especially problematic, leading to false-positive results in empirical tests. Our tests suggest using multiple imputation to handle unreported innovation.

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Deleting unreported innovation

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