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 journalArticleAcademicpeer-review

4 Citations (Scopus)
82 Downloads (Pure)

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 languageEnglish
Pages (from-to)2324 - 2354
Number of pages31
JournalJournal of Financial and Quantitative Analysis
Volume57
Issue number6
DOIs
Publication statusPublished - 15 Sept 2022

Bibliographical note

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

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