Information Disclosure and Competitive Dynamics: Evidence from the Pharmaceutical Industry

This paper studies how competitive dynamics shape innovative firms’ voluntary disclosure of product quality information. Our empirical context is the pharmaceutical industry, where firms must decide whether to disclose private drug quality information acquired in clinical trials. Using a difference-in-difference strategy, we show that the approval of a competitor’s drug lowers the likelihood of a firm reporting its clinical trial results by 13%. We explore how these effects vary based on the project quality, competitor type, and firm experience. These findings suggest that strategic considerations play a role in firms’ disclosure decisions; in response to a competitor’s drug approval, firms may selectively withhold information to maintain and improve their competitive position. This paper was accepted by Joshua Gans, business strategy. Funding: This work was funded by the National Institute on Aging [Grant T32-AG000186] and the UCLA Society of Hellman Fellows Program. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.01161 .