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Standing on the shoulders of giants: Financial reporting comparability and knowledge accumulation

Author

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  • Tseng, Kevin
  • Zhong, Rong (Irene)

Abstract

This study examines whether and how financial statement comparability facilitates the dissemination of innovative knowledge between firms and stimulates the creation of new knowledge. Using cross-patent citations to track interfirm knowledge transfers, we find that comparability increases firms' incentives to learn from peers and create new patents that cite their peers' existing patents. The investigation into the mechanism reveals that comparability improves firms’ ability to estimate the monetary value of peer knowledge and predict their own financial benefits from knowledge acquisition. The impact of comparability is more pronounced when peer knowledge is more publicly accessible or of higher monetary value. Consequently, the acquired knowledge fosters follow-on innovation, enabling firms to produce more patents with greater economic significance. Evidence from two quasi-natural experiments suggests that our findings are plausibly causal. Overall, our study highlights the important role of accounting comparability in facilitating knowledge dissemination.

Suggested Citation

  • Tseng, Kevin & Zhong, Rong (Irene), 2024. "Standing on the shoulders of giants: Financial reporting comparability and knowledge accumulation," Journal of Accounting and Economics, Elsevier, vol. 78(1).
    • Handle: RePEc:eee:jaecon:v:78:y:2024:i:1:s0165410124000156
    DOI: 10.1016/j.jacceco.2024.101685
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    Citations

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    Cited by:

    1. Meng Chao & Chen Chen & Xu Heng & Li Ting, 2024. "Asset Pricing and Portfolio Investment Management Using Machine Learning: Research Trend Analysis Using Scientometrics," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 18(1), pages 1-20.

    More about this item

    Keywords

    Innovation; Patent valuation; Externality; Knowledge spillover; Knowledge dissemination;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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