Document Type
Article
Publication Date
4-15-2013
Abstract
In this study, we examine firms’ investments in explorative initiatives and their choices of capitalization method in a product-market competition setting. Since the capitalization of exploration expenditures may contain information on whether a firm’s exploration investment is successful, financial reports may reveal important information to competitors, and thus may have real consequences in product-market competition. In our paper, we identify two driving forces that induce firms to choose different capitalization methods: an information-spillover effect and a preempting effect. We also find that enforcing an accounting method that requires firms to capitalize expenditures of only successful explorations may increase or decrease innovation investments. Our study sheds light on the impact that the recognition of exploratory success has on firms’ exploration investments.
Recommended Citation
Corona, Carlos; Nan, Lin; and Zhao, Ran, "Innovators and Imitators in Product-Market Competition and Accounting Reporting" (2013). Accounting Faculty Articles and Research. 13.
https://digitalcommons.chapman.edu/accounting_articles/13
Included in
Business Administration, Management, and Operations Commons, Business Intelligence Commons, Organizational Behavior and Theory Commons, Other Business Commons
Comments
Working paper