Does Competition Affect the Likelihood, Speed and Tenor of Mandatory R&D Disclosures?

Abstract

The information about R&D activities can shift the competitive landscape and carry a substantial strategic value for firms. However, most of our understanding of R&D disclosures is either for early-stage projects (i.e., patents) or when firms voluntarily share their information. Mandatory disclosures of development projects, such as clinical drug trials, demanded by regulators often put firms in a paradoxical situation - on the one hand, they face regulatory pressures to comply, and on the other hand, they fear informing competitors of internal developments. By integrating the theories of knowledge management and strategic responses to institutional forces, we propose that firms under intense competition would be reluctant to comply and share the results of their clinical trials. However, when they do share their results, they would do so quickly to deter competition. Further, firms would also use rhetoric in their scientific publications linked to the clinical trials to paint a favorable picture to competitors. We test our theoretical model with 7,731 completed clinical trials under a US Act (FDAAA 801) purview between the years 2008-2019 (both inclusive) and find confirming results overall. We discuss the broader implications of our findings on both theory and practice.