SOX Section 404 and Corporate Innovation

This paper exploits a quasi-natural experiment to investigate the relation between the Sarbanes–Oxley Act (SOX) of 2002 and corporate innovation: firms with a public float under $75 million can delay compliance with Section 404 of the act. We find a significant decrease in the number of patents and patent citations for firms that are subject to Section 404 compliance relative to firms that are not. This relation is more pronounced when firms are financially constrained and when firms face high litigation risk. Overall, our evidence suggests that SOX imparts real costs to the economy by decreasing corporate innovativeness.

R&D and Standardisation Activities of High Technology Industries in Japan in the Information and Communications Technology Services Field

This study aims to elucidate the relationship between Research and Development (R&D) and standardization of Information and Communications Technology (ICT) services in high technology industries of Japan. The study focuses on Intellectual Property (IP) standardization activities as a key factor in corporate innovativeness. The author examines the magnitude of the effects of R&D and standardization on patent applications in the Japanese electric machinery industry, which provide ICT services and includes the electric appliance manufacturers. The number of patent applications is known to have a positive impact on corporate innovativeness and can be used as a proxy for determining this magnitude of the impact. Pearson correlation coefficient between the number of persons engaged in IP standardization activities and the number of patent applications is found to be positive, but smaller in comparison with the number of persons engaged in R&D activities. However, the impact of standardization is larger than what is generally anticipated. These findings might assist corporate managers in decision making pertaining to allocating human resources.