DP13682 Risk-Mitigating Technologies: the Case of Radiation Diagnostic Devices

Author(s): Alberto Galasso, Hong Luo
Publication Date: April 2019
Keyword(s): Innovation, medical devices, product liabilities, risk perception
JEL(s): K13, O31, O32, O34
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13682

We study the impact of consumers' risk perception on firm innovation. Our analysis exploits a major surge in the perceived risk of radiation diagnostic devices, following extensive media coverage of a set of over-radiation accidents involving CT scanners in late 2009. Difference-in-differences regressions using data on patents and FDA product clearances show that the increased perception of radiation risk spurred the development of new technologies that mitigated such risk and led to a greater number of new products. We provide qualitative evidence and describe patterns of equipment usage and upgrade that are consistent with this mechanism. Our analysis suggests that changes in risk perception can be an important driver of innovation and shape the direction of technological progress.