How does innovation disclosure respond to heightened entry threats?

Abstract

Employing the deregulation of market entry barriers in China as a quasi-natural experiment, this study examines the impact of increased entry threats on firms’ innovation disclosure strategies. We find that, in response to heightened entry threats, incumbent firms strategically intensify their innovation disclosure. This strategic disclosure emphasizes incumbent firms’ competitive advantages in innovation while omitting detailed information that allows rivals to replicate their technologies. Additionally, the positive relation between heightened entry threats and innovation disclosure is mitigated by government ownership, product market competition, and firm size. Our study underscores the role of innovation disclosure as an entry deterrence strategy.