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Insider Trading and Innovation

by Ross Levine, Chen Lin, Lai Weivia IP2 Working Paper Series
Thursday, October 1, 2015

This paper assesses whether legal systems that protect outside investors from corporate insiders increase or decrease the rate of technological innovation. Based on over 75,000 industry-country- year observations across 94 economies from 1976 to 2006, we find that enforcing insider trading laws spurs innovation—as measured by patent intensity, scope, impact, generality, and originality.