Year
2022
Authors
KOH Ping-Sheng, REEB David M., SOJLI Elvira, THAM Wing Wah, WANG Wendun
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.
KOH, P.S., REEB, D.M., SOJLI, E., THAM, W.W. et WANG, W. (2022). Deleting Unreported Innovation. Journal of Financial and Quantitative Analysis, 57(6), pp. 2324-2354.