It’s an argument both manufacturers and the defense bar have been making for years: an increased risk of liability for new products will deter manufacturers from developing new technologies. Yet despite the apparent logic of such an argument, there was scant empirical evidence backing up this claim . . . until last month.
Researchers Alberto Galasso of the University of Toronto and Hong Luo of Harvard Business School recently published a working paper that examines the impact of increased litigation for medical implant manufacturers in the early 1990s. The paper, titled “How Does Product Liability Risk Affect Innovation? Evidence From Medical Implants,” shows how this increase led to a decrease in downstream innovation in medical implants and demonstrates how tort reform—specifically the 1998 Biomaterials Access Assurance Act (BAAA)—subsequently reversed this trend and spurred further innovation for raw material manufacturers.