Litigating Innovation: Evidence from Securities Class Action Lawsuits

Litigating Innovation: Evidence from Securities Class Action Lawsuits

Oliver Spalt, Elisabeth Kempf

Series number :

Serial Number: 

Date posted :

July 12 2019

Last revised :

July 12 2019
SSRN Share


  • innovation • 
  • Patents • 
  • Class Action Lawsuit • 
  • shareholder litigation • 
  • Corporate governance • 
  • law and economics

Low-quality securities class action lawsuits disproportionally target firms with valuable innovation output and impose a substantial implicit "tax" on these firms. We establish this fact using data on class action lawsuits against U.S. corporations between 1996 and 2011 and the private economic value of a firm's newly granted patents as a measure of valuable innovation output.

Our results challenge the widely-held view that it is the greater failure propensity of innovative firms that drives litigation risk. Instead, our findings suggest that valuable innovation output makes a firm an attractive litigation target. More broadly, our results provide new evidence to support the view that the current class action litigation system may have adverse effects on the competitiveness of the U.S. economy.


Real name:
Elisabeth Kempf